Ambitious climate policy pays off for Germany's and EU's own interests – report

Pushing for tougher climate action abroad is not only a moral obligation for Germany and the European Union, but squarely in their own economic and security interest, according to a report by state-backed German research consortium Ariadne. Climate damage avoided within the EU alone is worth around 34 euros for every tonne of CO₂ saved anywhere in the world, the authors calculate, with additional security and economic benefits on top.

Climate diplomacy has come under growing pressure in Germany and across Europe as governments prioritise competitiveness and security spending over foreign climate finance. Germany's previous government adopted a dedicated climate foreign policy strategy in 2023 to coordinate its international efforts, but the report notes the current coalition has since rolled back much of that structure, shifting responsibility back to the environment ministry alone. The Ariadne authors from the Potsdam Institute for Climate Impact Research (PIK), the Hertie School, SWP, Ecologic Institute, CT Economics, adelphi and Würzburg University argued this retreat is happening just as the case for staying engaged internationally is getting stronger.

The report analyses four policy approaches: financing decarbonisation abroad, creating incentives for other countries to act without paying them directly, shielding EU industry and climate policy from competitiveness pressure, and managing supply-chain risks for clean technologies. The authors cite the EU's carbon border tariff (CBAM) – which charges importers a carbon price matching the EU's own emissions trading system – as an example for a particularly effective policy tool, as it protects European industry from cheaper, more polluting competitors, while nudging exporting countries to introduce their own carbon pricing.

In contrast, the report is critical of the so-called Just Energy Transition Partnerships (JETPs) with South Africa, Indonesia, Senegal, and Vietnam, arguing they have struggled with fragmented financing, mismatched expectations between donors and recipient governments, and an overreliance on loans rather than grants. Germany is among the donor countries for these JETPs. Similar problems dogged the G7's "climate club," which lost momentum after a vague initial mandate was rushed onto the agenda without a clear plan, the authors argue.

“The climate club was pushed onto the G7’s agenda without a workable vision for its policy focus, leading to a hasty adoption of vague initial terms of reference among an ever-growing group of countries, i.e. potential veto players,” the report says. “Here, too, a lack of clarity in the initial stages took up considerable political resources during the phase of institutional creation.”

The report promotes so-called Jurisdictional Reward Funds, which would pay governments directly for verified, large-scale emissions cuts, starting with the cheapest reductions first, instead of focusing on individual projects.

The report also argues that a lack of assertiveness undermines Germany’s credibility in climate talks. "No one believes us when we say we won't agree to whatever the compromise is in the end," one unnamed German delegate is quoted as telling the authors. Being more open about the country's own self-interest, could actually strengthen its hand in future negotiations rather than weaken it, the authors argue.