Berlin On Tuesday, Robert Habeck used the signing of the coalition agreement to briefly outline the priorities he wants to set as Federal Minister of Economics. He will drive the expansion of renewable energies, which is not without unreasonable demands.
He is also interested in bringing together climate neutrality and prosperity in the largest industrial nation in Europe and the fourth largest economy in the world. Habeck also noted that Germany should support the EU Commission in insisting that the rule of law be adhered to in Poland and Hungary.
There is no doubt: This is where someone with high standards and creative drive goes to work. The bar for the Greens politician is high, the goals defined in the coalition agreement require Habeck to act quickly and decisively, there is no time to think about it. An overview of the most important tasks that Habeck is facing.
Habeck’s plans as the new Minister of Economic Affairs are extensive, and he wants to secure nothing less than the future of Germany as a location. But the green starts under difficult circumstances.
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The economic situation is not rosy. The aftermath of the past pandemic waves has caused significant problems in the international supply chains, which is blocking the production of companies. At the end of the year, the German economy should even shrink slightly.
It is hoped that the supply chain difficulties will resolve in the next few months. The big upswing, it could come and would help Habeck enormously. But this hope remains vague for the time being.
The fourth wave of infections creates considerable uncertainty as to further economic development. Incoming orders at companies have recently declined. Lockdowns like in the past are no longer to be expected, but the implementation of the 2G regulation alone is likely to cause a slump in sales in retail and catering.
Habeck’s room for maneuver is limited by the economy. The basic course setting for the transformation of the economy would not be influenced by this, says Justus Haucap, director of the Düsseldorf Institute for Competition Economics (DICE). “But immediate measures for climate protection will certainly be much more difficult for Habeck in view of the gloomy upswing,” explains Haucap.
The future Vice Chancellor is expected to distinguish himself as a Green Minister of Economics from the start. But that won’t be easy for him. Habeck must first initiate the return of the economy to normal mode. That’s a fine line to walk. In consultation with the traffic light, the old federal government has just started the extension of the corona aid.
Most of these should expire at the end of March. In view of blocked supply chains and the emerging omicron virus variant, whether the transition to normality can begin is a question to which Habeck cannot yet have an answer.
2. Clarify the relationship with China
Shaping the future of the relationship between Germany and China will be a task for the entire federal government. But that will be “a major challenge, especially for Habeck,” says economist Haucap. The Minister of Economic Affairs will be particularly important because he will have to deal with China’s direct influence on the German corporate landscape. One thing is clear: China will continue to penetrate Germany and put the companies under pressure. “We want fair rules in the increasing competition with China,” says the coalition agreement.
On the one hand, Habeck will have to act in the area of direct competition with Chinese companies that are supported by the state. In particular with future key technologies such as battery cell production or hydrogen, questions of national and European independence arise.
Strategic sovereignty must increasingly also have an impact on economic relationships, Habeck announced on Tuesday. This should succeed, among other things, with the help of a further developed industrial strategy with which the federal government can also support companies in key areas. However, there are skeptics in the ranks of the future coalition partner FDP who Habeck has to convince.
The outgoing Green Party leader will also have to make sure that China does not directly use important research and development from German companies. “With regard to China, you will have to look closely at where cooperations or takeovers of companies are in European and German interests or are sometimes not in this interest,” explained Habeck.
The instrument of investment control has so far only worked to a limited extent because it is only used when, for example, security interests are affected – but not to keep competitors away. The EU Commission is currently working on a proposal to change that. “If Habeck wants to secure Germany’s competitiveness, he has to signal his clear support to Brussels,” says Achim Wambach, President of the Center for European Economic Research (ZEW).
3. Save the climate
Robert Habeck will not only be economics and climate minister, but also vice chancellor. From this perspective in particular, more climate protection is not just a matter for his ministry, but for the entire government.
The reconciliation of economy and ecology “will certainly be the acid test of this government,” says Habeck. To spark a dynamic in Germany that goes beyond milieus willing to change, that is what the Green Party leader sees as a central obligation, especially for his party.
Habeck also knows that the Ministry of Economic Affairs and Climate, and thus himself as the responsible super minister, will be judged on “whether it is possible to bring down the climate-damaging CO2 emissions”. In four years, Germany must be on the path of the Paris climate protection agreement, said Habeck. “We have a lot of catching up to do.”
Above all, Habeck has an ally in climate protection in the designated Foreign Minister Annalena Baerbock. She has already made it clear that international climate protection is her task. The Ministry of the Environment, in the future led by the Green Steffi Lemke, would be deprived of any responsibility.
4. Accelerate the energy transition
As Schleswig-Holstein’s energy transition minister for many years, Habeck knows that every wind turbine has at least one personal enemy – he lives within sight of the wind turbine or has something fundamentally against wind turbines. The acceptance problems in combination with a creeping network expansion and tough approval procedures ensure that little progress is made in expanding wind power.
That should change fundamentally. Habeck said on Tuesday that the expansion of renewable energies would be a “long-distance run”. The new government plans to increase the share of renewables in electricity consumption to 80 percent in 2030. So far, the goal for 2030 has been 65 percent. Their share is currently around 50 percent.
Habeck announced a three to fourfold increase in the rate of expansion on Tuesday. Specific figures can be read in the coalition agreement: By 2030, photovoltaic systems with a capacity of 200 gigawatts (GW) are to be installed. It is currently around 54 GW. It took 20 years for the first 54 GW, and nine years for the remaining 146 GW. “It will be a great effort,” admitted Habeck. There will be a lot of social discussion if the new goals are to be achieved.
The traffic light aims to shorten planning and approval procedures, and two percent of the land area is to be designated for onshore wind energy. It is currently around 0.8 percent.
At the same time, Habeck wants to ensure that coal-fired power generation ends in 2030 – and not until 2038, as previously planned. With the rapid loss of secured power plant capacity, the next problem arises: New gas-fired power plants are needed, which always step in when wind turbines and photovoltaic systems do not produce electricity. New gas-fired power plants are controversial in their own party.
5. Transform the industry
The task is demanding, the schedule more ambitious than anywhere else in the world: Germany wants to be climate neutral by 2045, five years before the rest of the world. But what might be a show of strength in countries like Denmark or France turns into a Herculean task in Germany. Because Germany’s share of industry in gross value added is well above the EU average.
Habeck must pave the way for those industries that have a particularly difficult time mastering the transformation to climate neutrality because they are energy-intensive. Initially, these are steel cookers, chemical and cement companies that are at the start of many value chains.
But also industrial medium-sized companies, such as the manufacturers of paper or glass as well as suppliers for the automotive industry such as foundries or galvanizing plants, need help. “The point is that we cross the finish line alive,” says the manager of an affected industrial sector.
What can Habeck do? He must grant the affected companies grants that allow them to invest in new plants. In addition, he will have to subsidize the operating costs of these systems over the years. This will be necessary as long as not all global competitors have followed suit. It is about billions and reliable commitments that will extend into the next decade.
The coalition agreement contains information on the appropriate instruments. But the FDP urges caution: There should be no new permanent subsidies.
Time is running out. Many investment decisions have to be made now – not in two years.
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