Climate neutrality by 2045 requires additional investments of €65bn per year in Germany – KfW
Clean Energy Wire
Achieving Germany’s goal of climate neutrality by 2045 means that the state, companies and households in Germany will have to invest about 290 billion euros per year, state-owned development bank KfW has said in a report. The largest share (45%) of the roughly six trillion euros needed over the next two decades would have to be invested in the transport sector, followed by energy (25%), buildings (22%) and industry (8%), according to the report, compiled by consultancy Prognos.
KfW CEO Stefan Wintels said the calculations showed that Germany was facing “an ambitious but feasible task,” pointing out that high investment needs would also occur if the country continued to rely on fossil fuel-based technologies. Compared with a business-as-usual scenario based on fossil fuels, additional investment needs would amount to about 65 billion euros per year to reach climate neutrality 2045, or less than two percent of the country’s current GDP, the KfW said.
Wintels added that investments in climate neutrality also offer business opportunities for Germany’s green technology sector and reduce the costs linked to global warming. According to KfW, Germany is the second-largest exporter of climate technologies, and the sector’s rapid growth offers companies a chance to scale up.
Between 2018 and 2023, companies, households and the German state invested an average of about 110 billion euros per year in climate action, less than half of what KfW said is necessary to achieve climate neutrality as planned. In a 2021 report, Prognos had put total investments needs until 2045 at five trillion euros, but KfW said that price increases and investment bottlenecks since pushed up that figure.
Private and public companies would have to cover nearly half (€140 billion) of the required annual investments, up from currently about 80 billion per year. “This means companies have to greatly intensify their efforts,” KfW said.
In the energy sector, required investments would amount to roughly 1.3 trillion euros, including the modernisation of power and heating grids and large-scale renewable energy expansion. In industry, most investments would have to go into decarbonising production processes through electrification or hydrogen.
Households would need to invest in building renovation and switching to electric vehicles.
KfW released its analysis ahead of the UN climate conference COP31 in Antalya, Turkey, in November. The development bank said it would continue to work with partner organisations at COP31 to better coordinate investments in the transformation and open up access to international markets for German and European companies.