Maze of support programmes means German energy transition could 'hit a wall' – economists

The slur of programmes and initiatives aimed at boosting Germany’s emissions reduction efforts could turn into an uncontrollable and costly maze that risks to let the country’s energy transition "hit a wall", government advisor Monika Grimm said in business daily Handelsblatt. Grimm, who sits on the government’s council of economic experts, warned that the volume of support payments could “explode” by encouraging investors to apply in droves. A case in point would be the sudden halt to a support programme for energy-efficient buildings, which had to be stopped by new economy and climate minister Robert Habeck in late January to the dismay of the construction industry, as applications far exceeded the available funds. The programme was set up by the previous government and was criticised for providing billions of euros to support a standard that is already widely accepted in the industry. “If a programme applies solutions that merely reproduce the technological standard, then you’re wasting tax money,” Grimm said. She argued that many of the programmes set up in the past years had been ”half-hearted,” which “has given rise to a nitty-gritty and hardly discernible support framework,” she said. Grimm said a more comprehensive CO2 price would be a much simpler way to achieve cost-efficient effects. Hubertus Bardt of the German Economic Institute (IW) told the newspaper the programmes would often “concurrently pursue industrial policy interests or cater to particular individual actors,” acknowledging that some degree of inefficiency would probably be inevitable.

The article said that the support volume for climate-friendly building renovation increased ninefold between 2019 and 2021, from 1.9 to 18 billion euros, while support for low-emission vehicles increased 30 times over the same period, from 98 million to more than three billion euros.