Short-term economic effect of German climate package small – Deutsche Bank

The government’s recently adopted comprehensive climate package will have little effect on the Germany economy in 2020, says Deutsche Bank Research in its outlook for the next year. “The economic and fiscal effects of the German climate protection pact are likely to remain within the range of statistical uncertainty in 2020 and also in the years thereafter,” writes db research. While the package foresees higher state investments, the programme “will largely finance itself”, mostly through the planned CO₂ price in transport and buildings, the report says. The uncertainty regarding the long-term development of German climate and energy policy “continues to hamper investments in some sectors,” such as metal and chemicals, the bank adds. As for the fragile German government coalition of Chancellor Angela Merkel’s conservative CDU/CSU alliance and the Social Democratic Party (SPD), db research says it expects that the second half of the government’s term “will proceed without any major changes in political course. Nevertheless, the political dynamics are difficult to assess”. There is a “significant risk” that internal quarrels among the partners will weaken the government’s negotiation position when Germany takes over the EU Council presidency in the second half of 2020, it adds.

The German government presented a wide-ranging climate package in September. It is in the process of putting decisions into legislative texts and the parliament has already adopted some elements, such as the climate action law and the CO₂ pricing system for transport and buildings. Internationally, the EU and Germany hold a pivotal role in driving global climate ambition in 2020 and is seen as unclear whether Germany’s fragile government coalition can muster the necessary resolve to take a leading role.