How Germany can become climate neutral

A look at the evening news shows the global consequences of ongoing climate change. In view of the increasing frequency of devastating storms, floods and droughts, there is a strong need to operate as sustainably as possible. A good 80 percent of Germans are convinced that there is a very great or at least great need for action in order to avert the climate collapse. In this context, the opinion is often expressed that “the economy” is resisting the shift towards sustainability.

Indeed, some economists warn of high costs, sacrifices, and competitive disadvantages. Some associations join the choir, but they often only articulate the smallest common industry denominator. In reality, a completely different point of view is spreading among the management levels of German industry, from medium-sized companies to DAX board members. The scientifically sound insight that the costs of climate change will be much higher than investments in climate protection has long dominated there.

Instead of doing without, new business models give us the opportunity to meet needs in a resource-saving and climate-friendly way. Because many executives know: timely investments in an environmentally friendly future create the jobs and markets of tomorrow. Future-oriented politics is not only in our social, but also in our economic interest.

What Germany needs after the federal election is not a policy of the lowest common denominator, but a new government that does not perceive the necessary transformation as a danger, but as an opportunity to make Germany fit for the future. Instead of isolated approaches and defensive compromises, we need a new approach that recognizes our problems – from climate change and species extinction to social division and polarization – in their entirety and their connections.

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Top managers focus on the big picture

A group of German top managers has come together with the support of science as part of the “Germany’s Future Ways” initiative in order to focus on the bigger picture, beyond particular interests. The group wants to give the new federal government the necessary impetus to activate the decisive system levers: transparent impact measurement, political coherence and effective democratic governance.

Our “Compass for Germany” identifies seven fields of action that a new federal government – regardless of its composition – must address. In each area, the group provides specific recommendations for action, including examples of how other governments are already successfully implementing similar approaches. The most important task is to revise impact measurement, incentives and framework conditions in such a way that sustainable and socially desirable action is worthwhile.

The group recommends introducing holistic headline indicators beyond the gross national product and orienting political action accordingly. In addition to produced capital, Germany must also measure its natural, human and social wealth and increase it through investments. Only then can the necessary sector transformations be successful, from the energy transition to the transport transition to the turnaround in construction.

Just as state performance measurement must be realigned, the contribution made by companies must also be holistically recorded and rewarded in terms of social goals. This includes new forms of accounting. The social contribution, especially in terms of sustainability, should emerge from the list of economic returns in a detailed and transparent manner. In order to create real transparency, for example, an orientation of the variable manager remuneration to milestones on the way to climate neutrality can make a big difference.

Combine market forces with political incentives

The group’s recommendations combine existing market forces with appropriate policy incentives. New markets are emerging around the world, for example for secondary raw materials, negative emissions or ecosystem services. In order to position Germany successfully in these new markets, a paradigm shift in the tax and contribution system is indispensable – for example through the tax burden on resource consumption, coupled with relief on labor income.

Harmful incentive systems such as the diesel privilege, the commuter allowance or the tax exemption for kerosene, which have so far distorted the German and in some cases also the European market, should be eliminated as quickly as possible.

In order to accelerate the market readiness of key technologies, targeted political interventions are also required at national and international level, for example to ensure fair data access for companies and the public sector. Last but not least, a well-managed state budget includes keeping national resource consumption within the available limits. In concrete terms, this means: an industrial turnaround away from a product and towards a performance economy.

Only then can there be a reduction in resource consumption, underpinned by clear reduction targets. The need for this can be clearly seen from a number: Currently, the environmental and health damage that is borne annually by the general public as external economic costs in Germany adds up to up to 19 percent of the gross domestic product.

Learn from European neighbors

In this way we can learn from our European neighbors. Finland has set itself the target that the consumption of primary raw materials in 2035 must not exceed the 2015 level. In Denmark, municipal participation in mainland wind farms is particularly widespread – this not only ensures a high level of local approval, it also strengthens the finances of cities and municipalities. Sweden already decided in 2017 to halve the VAT rate for repair services in order to extend the life of products.

All of this should be an incentive and inspiration for us. Similar to the reconstruction after the war and the “economic miracle” of that time, the conversion to a better, sustainable economy for the 21st century is a joint effort. Through effective cooperation between research, business, civil society and the state in the central areas of energy, buildings, industry, agriculture and transport, we can achieve the necessary structural-changing progress, leap and system innovations.

Germany also has a European responsibility – if only because of its industrial leadership role. In order to implement the European Green Deal of the European Union, we Germans urgently need a fundamental change in mentality – away from procrastination and persecution, towards confidence and the will to shape things.

The authors: Prof. Maja Göpel is a political economist, expert on sustainability transformations and co-founder of Scientists4Future. Her book “Rethinking Our World” became a bestseller.

Martin R. Stuchtey is the founder and managing partner of SYSTEMIQ, a company that aims to accelerate the transition to a sustainable economic system. He is Professor of Resource Strategy at the University of Innsbruck.

More: Alnatura founder Rehn calls for radical measures for climate protection.

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