In 2020, subsidies or tax breaks totaling at least 35.8 billion euros drove up greenhouse gas emissions in Germany. If these incentives remain in place, they would result in an additional 156 million tons of CO2 emissions between 2023 and 2030. On the other hand, other state subsidies will ensure that emissions fall by around 250 million tons over the same period. This is the result of a comprehensive study commissioned by the Federal Ministry for Economic Affairs and Climate Action (BMWK), which, for the first time, provides a detailed overview of how government stimulus programs simultaneously drive and curb German emissions.
The study “Quantification of the greenhouse effect of state subsidies in Germany” was compiled by six institutes: IREES, Prognos, GWS, Fraunhofer ISI, Ifeu and the Oeko-Institut, which was in charge of the study. Although the Oeko-Institut only published the content of the study this Monday, the authors stated that it was already completed in November 2023. The BMWK, which commissioned the study, justified this by explaining that some terms still needed further discussion.
Environmental Action Germany, which had previously tried unsuccessfully to obtain the study by invoking the Freedom of Information Act, reacted indignantly to this delay. “In the latest budget agreement, the Deutsche Bahn once again suffers severe financial cuts,” Managing Director Jürgen Resch told Table.Briefings. “Despite the fact that the ministers have been aware of ways to save money and protect the climate for months.”
According to the 155-page study, which was exclusively made available to Table.Briefings in advance, the “state benefits with a climate-damaging effect” totaling 35.8 billion euros were distributed among the individual sectors in 2020 as follows:
The authors warn that the figures would normally be even higher. As economic and travel activity was low in 2020 due to the Covid pandemic, “the loss of revenue or budget funds for the same government benefits with a climate-damaging effect and other measures were higher in years other than 2020”.
The German climate target is to cut greenhouse gas emissions by 65 percent by 2030 compared to 1990 levels. In spring, Climate Action Minister Robert Habeck declared that this target was “achievable”: The ‘climate action gap’ that the government had identified when it took office would be “completely closed by 2030 if Germany stays on course.” In contrast, the Federal Government’s Council of Experts on Climate Change had pointed out in June, with reference to budget cuts, that “it cannot be assumed that the target will be achieved.”
The study states that “without taking interactions into account, an additional 156 million tonnes of CO2e will be generated by 2030 as a result of state subsidies with a harmful effect on the climate.” However, this is only a “rough orientation value” because in a “counterfactual scenario,” it is difficult to calculate interactions if all state benefits are canceled. The study also explicitly makes no reform proposals and does not take “carbon leakage” into account: For instance, it lists all subsidies for the fossil fuel industry as harmful to the climate – omitting to mention that the loss of these subsidies and a possible migration of climate-damaging production to other countries would not reduce emissions to the same extent globally.
The study fulfills one of the tasks of the government’s coalition agreement to create more financial leeway by reducing “superfluous, ineffective and environmentally and climate-damaging subsidies and spending.” Like the other G7 countries, Germany has also committed to ending its “inefficient fossil fuel subsidies” by 2025 at the latest. However, the latest data is only now being made public after the last budget of the coalition government was presented. So far, abolishing climate-damaging subsidies has hardly played a role in the debates. Nevertheless, the current study offers the opportunity for the upcoming budget discussions in the German Parliament to assess exactly how the allocation of state subsidies affects the climate footprint and the government’s goal of achieving net-zero emissions by 2045.
With the result of around 35.8 billion euros for climate-damaging subsidies, the report falls roughly in the mid-range of previously debated figures on the subject: For example, the German government’s 28th Subsidy Report of 2021 only lists around 7.4 billion euros in subsidies as “emission-favoring” as defined by the new study – and contrasts this with 6.7 billion euros in “emission-reducing” payments. In its report on “environmentally harmful subsidies” for 2018, the German Environmental Agency in turn puts the figure at a minimum of 65 billion euros – but also factors in all environmental damage that affects more than just the climate.
The current study now also details the climate impact of these measures for the first time. The “most climate-damaging state benefits” are in cumulative CO2 emissions from 2023 to 2030:
According to the authors, the data showed that “the highest emissions are caused by state electricity and energy subsidies.” However, these benefits could exist “for many different reasons, such as value creation, social aspects or security of supply,” and changes could “pose a risk of carbon leakage.”
There are also major differences when it comes to forgoing government revenue from climate-damaging behavior. According to the estimates for 2020, the following measures account for the most indirect subsidies:
However, the study also lists where state subsidies will contribute to lowering emissions by 2030. The largest items benefiting climate action are
However, the study did not measure how large the state benefits for this type of climate action were. Moreover, the “cumulative greenhouse effect could not be quantified” for over a third of all measures due to a lack of data.
In 2020, subsidies or tax breaks totaling at least 35.8 billion euros drove up greenhouse gas emissions in Germany. If these incentives remain in place, they would result in an additional 156 million tons of CO2 emissions between 2023 and 2030. On the other hand, other state subsidies will ensure that emissions fall by around 250 million tons over the same period. This is the result of a comprehensive study commissioned by the Federal Ministry for Economic Affairs and Climate Action (BMWK), which, for the first time, provides a detailed overview of how government stimulus programs simultaneously drive and curb German emissions.
The study “Quantification of the greenhouse effect of state subsidies in Germany” was compiled by six institutes: IREES, Prognos, GWS, Fraunhofer ISI, Ifeu and the Oeko-Institut, which was in charge of the study. Although the Oeko-Institut only published the content of the study this Monday, the authors stated that it was already completed in November 2023. The BMWK, which commissioned the study, justified this by explaining that some terms still needed further discussion.
Environmental Action Germany, which had previously tried unsuccessfully to obtain the study by invoking the Freedom of Information Act, reacted indignantly to this delay. “In the latest budget agreement, the Deutsche Bahn once again suffers severe financial cuts,” Managing Director Jürgen Resch told Table.Briefings. “Despite the fact that the ministers have been aware of ways to save money and protect the climate for months.”
According to the 155-page study, which was exclusively made available to Table.Briefings in advance, the “state benefits with a climate-damaging effect” totaling 35.8 billion euros were distributed among the individual sectors in 2020 as follows:
The authors warn that the figures would normally be even higher. As economic and travel activity was low in 2020 due to the Covid pandemic, “the loss of revenue or budget funds for the same government benefits with a climate-damaging effect and other measures were higher in years other than 2020”.
The German climate target is to cut greenhouse gas emissions by 65 percent by 2030 compared to 1990 levels. In spring, Climate Action Minister Robert Habeck declared that this target was “achievable”: The ‘climate action gap’ that the government had identified when it took office would be “completely closed by 2030 if Germany stays on course.” In contrast, the Federal Government’s Council of Experts on Climate Change had pointed out in June, with reference to budget cuts, that “it cannot be assumed that the target will be achieved.”
The study states that “without taking interactions into account, an additional 156 million tonnes of CO2e will be generated by 2030 as a result of state subsidies with a harmful effect on the climate.” However, this is only a “rough orientation value” because in a “counterfactual scenario,” it is difficult to calculate interactions if all state benefits are canceled. The study also explicitly makes no reform proposals and does not take “carbon leakage” into account: For instance, it lists all subsidies for the fossil fuel industry as harmful to the climate – omitting to mention that the loss of these subsidies and a possible migration of climate-damaging production to other countries would not reduce emissions to the same extent globally.
The study fulfills one of the tasks of the government’s coalition agreement to create more financial leeway by reducing “superfluous, ineffective and environmentally and climate-damaging subsidies and spending.” Like the other G7 countries, Germany has also committed to ending its “inefficient fossil fuel subsidies” by 2025 at the latest. However, the latest data is only now being made public after the last budget of the coalition government was presented. So far, abolishing climate-damaging subsidies has hardly played a role in the debates. Nevertheless, the current study offers the opportunity for the upcoming budget discussions in the German Parliament to assess exactly how the allocation of state subsidies affects the climate footprint and the government’s goal of achieving net-zero emissions by 2045.
With the result of around 35.8 billion euros for climate-damaging subsidies, the report falls roughly in the mid-range of previously debated figures on the subject: For example, the German government’s 28th Subsidy Report of 2021 only lists around 7.4 billion euros in subsidies as “emission-favoring” as defined by the new study – and contrasts this with 6.7 billion euros in “emission-reducing” payments. In its report on “environmentally harmful subsidies” for 2018, the German Environmental Agency in turn puts the figure at a minimum of 65 billion euros – but also factors in all environmental damage that affects more than just the climate.
The current study now also details the climate impact of these measures for the first time. The “most climate-damaging state benefits” are in cumulative CO2 emissions from 2023 to 2030:
According to the authors, the data showed that “the highest emissions are caused by state electricity and energy subsidies.” However, these benefits could exist “for many different reasons, such as value creation, social aspects or security of supply,” and changes could “pose a risk of carbon leakage.”
There are also major differences when it comes to forgoing government revenue from climate-damaging behavior. According to the estimates for 2020, the following measures account for the most indirect subsidies:
However, the study also lists where state subsidies will contribute to lowering emissions by 2030. The largest items benefiting climate action are
However, the study did not measure how large the state benefits for this type of climate action were. Moreover, the “cumulative greenhouse effect could not be quantified” for over a third of all measures due to a lack of data.
