Rebuilding the economy after COVID-19 and tackling the climate crisis must go hand in hand. For Germany to achieve its target for climate action, it needs to tap into overlooked areas of potential to reduce its CO₂ emissions. In particular, this process will be essential for the transport sector. And there is even more that can be done with innovative building solutions.
About Mrs Köhler-Geib
Dr Fritzi Köhler-Geib has been the chief economist at KfW since late 2019. Prior to this, she worked at the World Bank in Washington, D.C., for eleven years – most recently as chief economist for Central America. Köhler-Geib was educated at universities in Paris, Michigan, St. Gallen, Barcelona and Munich.
Action to save the climate is getting serious. The EU plans to tighten up its climate targets as part of the European Green Deal, and in late 2019, the German Federal Government became the first in the world to enshrine its national climate action target into law as a binding requirement. At the same time, the global economy unexpectedly slipped into a deep crisis due to the coronavirus pandemic. In Germany, too, despite extensive aid measures, there has been a substantial drop in income and increased indebtedness in large parts of the economy. Against this background, it is now all the more important to keep an eye on achieving climate neutrality. Rebuilding the economy and tackling the climate crisis must go hand in hand.
In order to achieve the targets by 2030, the annual reduction in greenhouse gas emissions must in future be more than twice as high as between 2006 and 2018. What this means, can be clearly illustrated by the building and transport sectors, which both face major challenges despite different developments to date.
According to provisional figures for 2019, the building sector has already reduced its greenhouse gas emissions by 42 percent since 1990. However, emissions will need to fall by an extra 43 percent by 2030. More investment in energy efficiency improvements is needed to achieve this goal, including in non-residential buildings. Although these account for only one in seven buildings, they are responsible for more than a third of the energy consumption and almost half of all greenhouse gas emissions in the building sector.
Due to the comparatively high levels of energy consumption and the systems technology present in non-residential buildings, large reductions can often be delivered with relative ease. However, the necessary investments are generally not part of the owners’ core business activities, and there are pessimistic expectations in terms of energy efficiency measures’ payback periods and returns on investment in the current environment. In addition, the measures often come with high transaction costs for planning and implementation.
Read more under the image gallery.
Since 1990, greenhouse gas emissions have decreased significantly in some areas. The building sector has achieved the greatest reductions to date, while the transport sector has been least successful.
Non-residential building owners therefore need incentives to address the issue of energy efficiency. The carbon pricing facilitated by the German government’s climate action package is one helpful tool in this context. Additional promotional measures that take the varied nature of non-residential buildings into account, support necessary investments and expand the availability of energy advisory services can also help overcome barriers to greater energy efficiency.
An even greater effort to achieve the climate targets is needed in the transport sector. Today, emissions are at about the same level as in 1990. This is due to efficiency gains in drivetrain technology being offset by more powerful engines, heavier vehicles and higher transport volumes. It currently appears that this trend will continue uninterrupted – by 2030, the volume of passenger transport is expected to increase by ten percent, while freight transport is expected to experience a 40 percent increase compared to 2010.
“We will be able to effectively protect our climate if we show that this will be financially viable”
How can the transport sector achieve its climate targets? The use of electric vehicles offers a valuable solution, which will make it possible to integrate renewable energy sources into the sector. So far, EVs have not been widely adopted in Germany. The Federal Government’s transport sector advisory group, known as the National Platform Future of Mobility, assumes that there will be up to ten million electric cars by 2030, which would deliver 30 percent of the required reductions. Even with today’s electricity mix, electric cars are climate-positive after they have travelled around 80,000 kilometres. If they are powered by green electricity, which is largely the case in Germany according to the KfW Energy Transition Barometer, the positive impact on the climate starts much earlier. In 2019, the share of gross electricity consumption derived from renewable energy sources hit a new record of 42.6 percent, giving a further boost to electric transport. Especially in the freight, maritime transport and aviation industries, electricity-based energy sources such as green hydrogen will also be required.
However, the switch to alternative vehicle propulsion systems is only a first step. More broadly, behavioural changes will be needed. The success of these changes will depend on whether the incentives are properly provided; whether public transport can be made more attractive; and whether innovative approaches, such as auctioning off time slots for travelling into city centres to avoid traffic jams, are also considered.
We will be in a position to effectively protect our climate when we can show that it will be financially viable by providing fast and practical solutions.
An ambitious climate action policy with appropriate incentives for the necessary investments also opens up new markets, contributes to the modernisation of the economy and thus improves its crisis resilience and future viability.
Published on KfW Stories: 1 October 2020.