Huge state investments needed to hedge against Germany's decarbonisation – economists

Decarbonising Germany’s economy while safeguarding the country’s prosperity will require "massive" investments by the state, for example in infrastructure, write economists at the Macroeconomic Policy Institute (IMK) in a paper on economic policy challenges in 2020. Climate action poses "great structural challenges" and uncertainties for the German industry, the researchers say. As the climate package adopted in autumn 2019 is seen as lacking ambition, it will likely have to be adapted in the coming years, they add. “Since it is not foreseeable what concrete policies will look like at that time, it is only rational for companies to shelve investments in new plants.” While Germany's climate action plans, such as the CO₂ price for transport and buildings, are criticised for not being  ambitious enough, the new European Commission president Ursula von der Leyen’s Green Deal is deemed more promising.

Faced with climate protests and threats of missing key energy and climate targets, chancellor Angela Merkel’s government coalition presented a comprehensive climate package on 20 September, which is supposed to be implemented over the course of the next years. However, critics quickly said the package is not adequate for reaching Germany's climate targets. In December, the European Commission presented the framework of an ambitious comprehensive economic plan to make the continent climate neutral by 2050 – the European Green Deal.