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Energy and Environment
Analyses and survey findings on
- Energy sector and energy transition,
- Renewable energies and energy efficiency,
- Adapting to climate change and
- Environmental and resource protection.
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We would be happy to provide you with regular updates from KfW Research.
Economics in Brief
Climate action scenarios for Germany show that the goal of reducing greenhouse gas emissions by 95% and more will require the use of green hydrogen and its derivatives. However, the challenges for broad market penetration are still huge.
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Focus on Economics
International shipping releases more CO2 emissions than all of Germany. Already today, however, there are enough viable technological solutions to prevent this. Many stakeholders are also aware of the problem and going new ways. But many conditions pose a challenge, such as inadequate legal frameworks. Still, the momentum that can be observed in some segments of maritime shipping can teach very valuable lessons.
Climate action in shipping is very similar to global climate action but the stage is much less complex. In this sense, maritime shipping can be seen as a laboratory in which new solutions are developed and trialled. This Focus puts a spotlight on this aspect and discusses selected strategies for new avenues.
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Sustainable maritime shipping and climate action (PDF, 225 KB, non-accessible)
Focus on Economics
The analysis of the current state of SDG reporting by banks shows:
- Most of the analysed banks are now involved with the topic of SDGs (Sustainable Development Goals)
- However, so far less than one third of the analysed banks have created actual transparency across their portfolio.
- Fewer than 10% of the analysed banks are already applying SDG-related KPIs (key performance indicators) and reorienting part of their business activity towards sustainable financing
PDF for download:
The Sustainable Development Goals – SDG reporting by banks (PDF, 547 KB, non-accessible)
Focus on Economics
The unabated growth of global resource consumption is the main cause of global climate change and biodiversity loss. At the same time, competition for scarce commodities is intensifying. In the face of these challenges, the shift to a circular economy is expected to help make economic management sustainable and competitive. The aim is to design entire production systems in the form of closed-loop cycles that minimise waste and emissions. Under the ‘EU Action Plan for the Circular Economy’ of 2015, the European Union provides clear impetus for advancing the transition to a more circular economy in Europe. Germany is one of the recycling pioneers in the EU. But with respect to waste avoidance, recycling-friendly product design and material efficiency, Germany still has great development potential – as does all of Europe.
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The circular economy – pivotal to sustainability and resource security (PDF, 404 KB, non-accessible)
Focus on Economics
The energy price system is in urgent need of reform to enable an efficient energy transition in Germany. Adequate incentives for low-emission technologies cannot be set without uniform CO2 pricing in all sectors. The price distortion is hampering the sector coupling and integration of renewables.
Experts have engaged in a multi-year discourse that has now led to a very broad consensus. The common objective is to adopt a CO2-oriented reform of energy price components set by the state that takes into account redistribution effects. A number of robust expert opinions are now available that outline clear recommendations for action. However, implementing these recommendations requires a strong political will and commitment to climate action.
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Focus on Economics
Although measures have been initiated and progress has been made in individual areas, the necessary trend reversal in biodiversity loss has not yet been achieved – neither globally nor in Germany. This development poses a threat to the economies, food security and quality of life of people all over the world. Humankind depends on well-functioning ecosystems. Nature makes numerous ecosystem services available, such as fertile soils, food, natural medicines, drinking water and clean air. It regulates the climate and provides recreational opportunities for humans. The economic benefits of an intact natural environment are often not sufficiently recognised. In order to be able to stop the loss of biodiversity, more nature conservation areas are necessary. Crucially, however, production, consumption and agriculture also need to be made sustainable.
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Biological diversity – why it is so important (PDF, 327 KB, non-accessible)
Focus on Economics
Energy costs have become much less important for German SMEs in the past few years. In 2017 only half as many enterprises struggled with high energy costs as in 2013, particularly because the prices of the most important energy sources dropped. The positive consequences are measurable. Energy price increases can currently be mitigated easily. The monitoring conducted under the KfW SME Panel also reveals a change in awareness. Enterprises have stepped up their efforts to improve efficiency and save energy – especially small businesses. This is good news as they had the most catching up to do. But no one should rest on their laurels because achieving national energy conservation targets also requires further efforts from the business sector.
Focus on Economics
Germany is one of the G20 and EU-28 countries with the highest energy efficiency. Between 2000 and 2017 alone, total primary energy intensity for all of Germany – the relation of primary energy consumption to real GDP – dropped by nearly 25 %. Nevertheless, the decline in absolute primary energy consumption over the same period was relatively modest, at -6 %. Savings achieved by technical energy efficiency improvements and expansion of renewables were largely offset by higher energy consumption resulting from economic growth, higher traffic volume, changes in consumption patterns and population growth. Germany will have to significantly reduce energy consumption in absolute terms in order to meet its national climate targets.
How energy-efficient is Germany? (PDF, 125 KB, non-accessible)
Focus on Economics
The challenges for achieving the UN Sustainable Development Goals and the Paris climate targets are enormous and also apply to the finance sector. Credit institutions should examine whether they are appropriately positioned in light of the long-term risks of climate change, as well as the opportunities potentially arising from ambitious climate policy. Ultimately, however, climate-policy measures aimed at the banking sector cannot be a substitute for targeted climate policy in the sectors originally responsible for greenhouse gas emissions.
Economics in Brief
The French government of President Emmanuel Macron is committed to the Paris climate agreement and seeking a leading role in international climate policy. Like Germany, however, France has so far met its climate targets only in part. The responsible minister, Nicolas Hulot, presented his 'Plan Climat’ in July 2017. France continues to set itself ambitious climate targets that will impact areas such as the phasing out of coal, the use of nuclear energy and the end of the combustion engine.
PDF for download:
Energy transition in France – winds of change with Nicolas Hulot (PDF, 81 KB, non-accessible)
Economics in Brief
The global market for green bonds has grown rapidly since 2013 and seen a considerable rise in the number and diversity of actors. The market in Germany is basically dominated by state promotional banks. Green bonds continue to make up only a small segment of the overall bond market. Further improving their quality and transparency through standardisation will be key to developing the market.
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Economics in Brief
In the past two years, around 29 % of US small and medium-sized enterprises have implemented specific measures to improve their energy efficiency. This is the result of a survey KfW Research conducted among more than 3,000 businesses in ten important economies across Europe and the world. In no other country have SMEs recently been more active.
With its announcement to pull out of the Paris climate change agreement, the USA is jeopardising further progress in energy efficiency. This is a serious setback – not just for climate action. It might also make US small and medium-sized enterprises less internationally competitive in the long run.
PDF for download:
US climate policy jeopardises SMEs’ energy efficiency gains (PDF, 45 KB, non-accessible)
Economics in Brief
The new US administration claims that climate protection puts too heavy a burden on the US economy. It also makes environmental and climate regulations adopted by the previous administration responsible for job cuts in the US coal industry. This paper examines whether there is any evidence for these arguments. Its finding is that the planned climate policy change is detrimental to the global competitiveness of the US and threatens jobs in 'green' industries of the future.
PDF for download:
Is climate protection really bad for the US economy? (PDF, 42 KB, non-accessible)
German SMEs must defend their competitiveness – and continue improving their energy efficiency
German SMEs have moved up to first place in the international competitiveness ranking of small and medium-sized enterprises in ten industrialised and emerging economies. This is the result of the KfW Competitiveness Indicator 2016, which is based on the assessment of more than 2,200 small and medium-sized enterprises in ten important economies of Europe and the world.
An important starting point for improving international competitiveness is to increase energy efficiency. In international comparison, German SMEs are already quite advanced, with one in four having implemented energy efficiency measures in the past two years. But further efforts will be necessary, not just in order to remain competitive but also to achieve the national climate protection targets.
PDF-Download:
KfW Competitiveness Indicator 2016 (PDF, 1 MB, non-accessible)
KfW/ZEW CO2 Barometer
Important findings of this year's survey:
- While the Paris Agreement has the potential to be a major breakthrough in global climate negotiations, a majority of German companies participating in the EU ETS do not expect that it will be effective in reducing global emissions, not even in the long run.
- In the current trading period the EU ETS has generated only weak incentives for firms to implement carbon abatement measures.
- The trading scheme should be further strengthened to ensure the effectiveness and efficiency of climate action in Europe.
PDF for download:
KfW/ZEW CO2 Barometer 2016 – Carbon Edition (PDF, 2 MB, non-accessible)
Focus on Economics
Heating accounts for more than half (54 %) of final energy consumption in Germany. The heating sector is responsible for around 26 % of Germany's total annual greenhouse gas emissions. Therefore, an energy transition cannot work without a heating transition. Energetic refurbishment and energy-efficient construction of new buildings, as well as efficient process heat and waste heat use in trade and industry are key starting points for reducing heat consumption. It is also necessary to press ahead with the expansion of renewable energy use in the heating sector.
PDF for download:
The energy transition will not work without a heating transition (PDF, 93 KB, non-accessible)
Economics in Brief
Green bonds are variable or fixed-income securities issued by an entity that undertakes to use the issue proceeds to finance environmental and climate protection projects. Since the first bond was issued in 2007, the green bond market has grown significantly, especially in the last three years. Green bonds so far make up only a small segment of the overall bond market. As the market develops, further improving the quality and transparency of green bonds through standardisation will be crucial.
PDF for download:
Market for green bonds is taking root (PDF, 60 KB, non-accessible)
Focus on Economics
The European Union and developing and emerging countries in Asia are moving closer together. Not only have trade relationships become considerably stronger, the flow of finance and foreign direct investment has increased too. There is also a growing recognition that both regions will be faced with similar challenges in the future, such as intensifying climate protection, rectifying infrastructure deficits – a key obstacle to growth – and demographic change. Increased cooperation and wide-ranging sharing of experience would help both regions to find sustainable solutions to these major issues.
PDF for download:
Common challenges for Europe and Asia as interdependence grows (PDF, 569 KB, non-accessible)
KfW/ZEW CO2 Barometer
A large proportion of the manufacturing companies participating in the survey increased their energy efficiency in the last year. However, a significant proportion will consume more energy in the next five years. The respondents report electricity as the most significant driver of energy costs followed by gas. Energy efficiency is listed most as an opportunity of the energy transition by the companies. Flexibility of electricity demand is seen as an opportunity by only one third of the companies. More flexible electricity demand seems to be a challenge, especially for small and medium-sized companies.
PDF for download:
KfW/ZEW CO2 Barometer 2015 – Manufacturing Industry Edition (PDF, 2 MB, non-accessible)
Focus on Economics
European natural gas prices have risen relative to US prices, especially as a result of increased shale gas supply in the USA. Energy-intensive industries in Europe are faced with the major challenge of compensating this effect by increasing their energy efficiency. But the improved integration of the European natural gas market, the broader supply of imports and, most of all, the strong decline in demand for natural gas in the context of the Energy Union are counteracting further price rises in Europe.
PDF for download:
Fuelling the future with natural gas (PDF, 818 KB, non-accessible)
KfW/ZEW CO2 Barometer
In 2014, EUA price expectations were corrected upwards and depict a positive trend in the medium and long term. Nevertheless, CO2 abatement remains in most cases only a side effect of energy efficiency measures and the EU ETS generated only weak incentives for firms to implement carbon abatement measures. A binding international climate agreement is considered to be less harmful for companies’ competitiveness than Europe-wide or national climate actions.
PDF for download:
KfW/ZEW CO2 Barometer 2015 – Carbon Edition (PDF, 2 MB, non-accessible)
Economics in Brief
With its planned Energy Union package, the European Commission is pursuing extensive reforms to the European energy system. The specific aims of the Energy Union are to increase security of supply, further integrate the domestic EU energy market, increase energy efficiency, reduce energy consumption, lower CO2 emissions and support research and development (R&D). To do this requires cross-border cooperation between countries and coordinated energy markets, which will lead to cost efficiency. Because of the diversity of the member states’ energy policy interests, there is still a long way to go.
PDF for download:
More Europe! On the road to Energy Union (PDF, 55 KB, non-accessible)
Focus on Economics
In public debates, energy costs are usually equated with electricity prices. For households and manufacturers in particular, gas costs are just as relevant and yet they are ignored. Although electricity prices have risen sharply due to the German Renewable Energy Act (EEG) levy, energy costs increasingly reflect the larger input factor of fossil fuels (especially oil and gas).
PDF for download:
Energy cost drivers: It’s not just about electricity! (PDF, 114 KB, non-accessible)
Focus on Economics
In many developing countries the state, for socio-political reasons, sets energy prices at a low level that does not cover costs. This subsidy policy is questionable from an economic, developmental and environmental point of view. Happily, a number of countries have used the recent fall in oil prices to dismantle their energy subsidies. However, that is far from the end of the problem.
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KfW/ZEW CO2 Barometer 2014
The manufacturing companies participating in the survey expect increasing energy prices and their most important sales markets to be global in 2020. The respondents list grid expansion as the biggest challenge of the German energy transition and the majority considers the EEG levy to be the most important driver of electricity prices. Half of the companies use energy consulting services. However, only a minority uses energy contracting. Moreover, the survey results indicate that energy efficiency assessments are a prerequisite for investments in energy efficiency.
KfW/ZEW CO2 Barometer 2014 – Manufacturing Industry Edition (PDF, 196 KB, non-accessible)
KfW/ZEW CO2 Barometer
At the beginning of the third trading period, CO2 prices remain persistently low barely leading to carbon abatement measures. Although companies expect increasing prices of emission allowances in the long run, the price needs to be six times higher than the average price in 2013 in order to incentivize companies to abate CO2. This exceeds the expected rise in prices by far. In the end, CO2 abatement is in most cases only a positive side effect of energy efficiency measures.
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KfW/ZEW CO2 Barometer 2014 – Carbon Edition (PDF, 398 KB, non-accessible)
Economics in Brief
This week the IEA presented its "World Energy Investment Outlook" Special Report. The growing need for investment in global energy supply (at least USD 40 trillion by 2035) and energy efficiency (at least USD 8 trillion by 2035) is posing significant challenges for financiers. Promotional banks play a crucial role here.
PDF for download:
What next for global energy investments? (PDF, 100 KB, non-accessible)
Economics in Brief
The amendment of the German Energy Saving Ordinance (EnEV) on 1 May will tighten the requirements regarding energy demand in new buildings from 2016. With a view to the EU directive calling for all new buildings erected from 2021 to be "nearly zero energy buildings", this is an appropriate and necessary step. However, the crucial potential for increasing energy efficiency in residential buildings is to be found in the existing housing stock. The new EnEV does not prescribe any tightening of the requirements relating to energy efficiency in this area. So a significant increase in refurbishment measures is indispensable if the German energy turnaround objectives are to be achieved.
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EnEV 2014: Housing stock is key to success – nine million buildings in need of renovationEnEV 2014: Housing stock is key to success – nine million buildings in need of renovation
Focus on Economics
Gas imports from Russia cannot be replaced in the short term. In the long term there are options available to diversify the supply of gas to Europe and import more liquefied natural gas (LNG). Furthermore, raising energy efficiency and expanding renewable energies reduces the demand for gas. With regard to Russian oil supplies, alternative international sources would probably be available more quickly.
PDF for download:
Energy from Russia and the alternatives (PDF, 169 KB, non-accessible)
KfW/ZEW CO2 Barometer
The study is based on an survey among German manufacturing firms. Questions address energy price expectations, investment in energy efficiency and the companies' opinion on the German energy transition.Results: Most companies that have invested in energy efficiency in the production process have energy consumption targets.More medium-sized and large companies invest in energy efficiency than small companies.Grid expansion is considered the biggest challenge of the German energy transition and the EEG levy the main driver of electricity prices.
PDF for download:
KfW/ZEW CO2 Barometer – Manufacturing Industry Edition (PDF, 342 KB, non-accessible)
Focus on Economics
Car sharing started off as a green alternative; it has now proved itself in practice and is growing strongly. Reason enough to investigate its incentive structures and their significance for the energy revolution. Ultimately, car sharing should facilitate a reorganization of the personal transport sector so that it, too, can contribute to achieving the goals of the energy revolution. At the same time, a comprehensive car sharing provision is economically advantageous for many transport users and may even open up entirely new land use options for local authorities.
PDF for download:
How can car sharing help in the energy turnaround? (PDF, 322 KB, non-accessible)
Focus on Economics
SMEs are making good progress towards greater energy efficiency. The desire to reduce energy costs is the driving force. This will make them more competitive. Smaller companies in particular have some catching up to do.
PDF for download:
Energy costs and energy efficiency in the German SME sector (PDF, 340 KB, non-accessible)
Focus on Economics
More companies are qualifying for exemptions from the EEG (Renewable Energies Act) levy. Against this background, the classification of energy costs and the energy productivity of energy-intensive companies are analysed.
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Economics in Brief
Renovations can reduce heating costs, but also protect buildings against serious risks associated with climate change.
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Climate change also affects the residential sector (PDF, 218 KB, non-accessible)
Economics in Brief
The decision not to issue 900 million permits until the end of the third trading period has failed to prompt significant price rises or incentivise investment.
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Economics in Brief
Energy cooperatives are growing in importance for the energy turnaround. Their role is changing, but they are also faced with new challenges
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Energy cooperatives need to professionalise following elections (PDF, 179 KB, non-accessible)
KfW/ZEW CO2 Barometer
Decreasing EUA prices lead to adjusted price expectations and weak incentives for CO2 abatement.
PDF for download:
KfW/ZEW CO2 Barometer 2013 – Carbon Edition (PDF, 413 KB, non-accessible)
Focus on Economics
Municipalities have a considerable need for conversion and demolition, the demographic change plays a major role. Until 2017, EUR 25 billion should be allocated to conversion and demolition.
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Economics in Brief
Rising electricity prices as a result of the transformation of the German power system are the topic of current political debates. In a European comparison, electricity prices in Germany have risen above average for households and below average for industrial consumers.
PDF for download:
KfW/ZEW CO2 Barometer
EU EHS currently produces little incentive for CO2 abatement, currently only low risk that investments and emissions will be diverted because of emissions trading.
PDF for download:
KfW/ZEW CO2 Barometer 2012 (Executive Summary) (PDF, 117 KB, non-accessible)
