Climate package will increase jobs but slow Germany's economic growth – analysis

Germany's climate package will create more jobs than a business-as-usual scenario while it is overall expected to have a slightly negative effect on economic growth, shows an analysis by the Institute for Employment Research (IAB). The analysis foresees a loss of around four billion euros in Germany's gross domestic product (GDP) by 2032, a drop that the institute calls "very insignificant" compared to Germany's overall GDP. Particularly two measures – the national CO2 price and incentives for the renewal of heating systems – are expected to affect jobs, as they influence the labour-intensive building industry. Although the IAB's researchers expect the climate package to have a relatively small effect on economic growth and employment, it will still create substantial structural change in the labour market, where 44,000 jobs are expected to be cut and 70,000 created.

The government released the climate pacakge in September 2019 in a bid to set Germany on track towards reaching its international emission reduction obligations, with the carbon pricing scheme in the transport and buildings sector being a key component supposed to be implemented over the course of the next years. However, following heavy criticism of the initial carbon price's relatively low level, the federal parliament in December 2019 decided to raise it.