Germany invests EUR37 billion to reduce the impact of climate change

BERLIN, Germany – A new study released today by Climate Policy Initiative (CPI) provides the first comprehensive overview of how German businesses, households, and government finance renewable energy and energy efficiency. The report “The German Landscape of Climate Finance” shows that Germany invested 1.5% of GDP in 2010, or EUR 37 billion, in measures to reduce the impact of climate change.

Private capital is of great importance to climate investments in Germany. In 2010, the majority (EUR 22 billion) of climate finance came from corporate investors across all sectors of the economy, including farmers, energy utilities, and industrial and commercial enterprises. Private households invested a significant EUR 14 billion.

According to CPI, government incentives play a major role in unlocking private climate finance in Germany. Almost half of all private climate investments (EUR 16.5 billion) were supported by low-interest loans from public banks, such as KfW or Rentenbank.

“The task of the government is to create the conditions for businesses and households to invest in renewable energy and energy efficiency. And indeed, government-backed low-interest loans and policies such as the feed-in-tariff seem to have played an important role in encouraging these private investments,” says Barbara Buchner, Director, CPI Europe.

The German government has committed to reduce greenhouse gas emissions by 80-95% by 2050 and phase out nuclear energy by 2022. These objectives have positioned Germany as a world leader in national climate mitigation efforts, but also require significant investments that cannot be provided by public funds alone. Therefore, a high share of private finance can be regarded as a positive signal for Germany’s low-carbon strategy.

The report also looked at how climate finance is used in Germany, and presents figures for total capital investments for renewable energy and incremental investments for energy efficiency. Renewable energy generation accounted for the bulk of Germany’s climate investment in 2010, with EUR 26.6 billion. Small-scale renewable energy projects, such as residential solar photovoltaic installations, represented 75% of all investment in renewable energy, while large-scale projects accounted for the remaining 25%. Energy efficiency investments amounted to EUR 7.2 billion, and EUR 3.3 billion went into other climate specific investments.

As the most comprehensive picture of climate finance flows in Germany to-date, “The German Landscape of Climate Finance” lays the groundwork for discussions around German climate finance and the effectiveness of the current climate policy framework. The report also identifies data and reporting gaps for tracking national climate finance. Germany’s total financing needs, for example, are yet undetermined and it is therefore unclear whether current investment levels are sufficient for reaching Germany’s climate and energy targets.

“If we want Germany’s energy transition to be a success, and if we want other countries to learn from the German experience, we need a better understanding of current finance flows and the impact of policies on encouraging investments,” says Ingmar Juergens, Associate Director of CPI Berlin.