Germany still lacks business model for clean industry - think tank

German industry needs a reliable political framework for decarbonisation to remain competitive, writes think tank Agora Energiewende* in a new report titled ‘Climate neutrality 2050: What industry needs from politics now’. The report is the result of several rounds of talks between the think tank and seventeen of Germany’s biggest industrial companies, including the chemical groups BASF, Bayer, Covestro, Lanxess and Wacker, the steel producers Salzgitter and Thyssen-Krupp, and the building materials group HeidelbergCement, in collaboration with Stiftung 2°, an entrepreneurial network for progressive climate policy, and consultancy Roland Berger. "A lack of climate policy is damaging Germany as a business location," the paper states. Old fossil technologies are a bad investment, but there is no business model yet for new technologies, Patrick Graichen, director of Agora Energiewende, explained. "If the state does not resolve this dilemma, we will get an investment blockade that Germany cannot afford," he said.

One major concern for companies is where the clean energy for their factories will come from. The think tank considers the government’s current expansion targets for wind and solar power as too low, and says the increase would have to be almost doubled by 2030. Industry also wants to see compensation for temporarily higher operating costs in the transition phase, through so-called “carbon contracts for difference”, the report says. Sabine Nallinger of Stiftung 2° said: "We do have a climate protection law. But a law is still a long way from being a functioning business model."

Germany has committed to the goal of climate-neutrality by 2050. As set in the Climate Action Law, the country aims to reduce emissions by 55 percent in 2030, a goal that will likely become more ambitious in light of the new EU target for 2030 of “at least 55 percent” reduction by 2030. Heavy industry, including the production of steel, cement and chemicals, is one of the toughest nuts to crack in the energy transition, because emissions reductions can’t be achieved by simply replacing fossil fuels with renewable power. Instead, entirely new, clean production methods are required. Last year, the German cement industry (VDZ) presented plans for the decarbonisation of the industry in its effort to become climate neutral by 2050.

*Like Clean Energy Wire, Agora Energiewende is funded by the Stiftung Mercator and the European Climate Foundation.