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Two major pillars of the German economy - its mammoth car market and manufacturing sector - are clear laggards in emissions reduction and must accelerate their decarbonisation if Germany is to make good on its energy transition commitments.

The German economy has been one of the hardest hit by the fallout from the Russia-Ukraine war, which has caused power prices to soar across Europe and sparked European Union members to slash purchases of Russian energy products.

Germany is also a highly influential industrial and policy leader within Europe, able to deploy both the technical acumen to empower the energy transition, and the political clout to set - and realise - bold climate ambitions.

Yet little of this leadership heft has been evident lately as German industry and households - top consumers of Russian natural gas - grapple with the near-term impact of higher energy costs and the long-term implications of a disentangling of Germany’s economy from a major trading partner.

But the Ukraine-Russia crisis has also underscored how the energy transition away from fossil fuels can increase Germany’s energy security by reducing the reliance on any single supplier.

The problem is, making that transition is much easier said than done, especially for an economy primarily driven by manufacturers that in turn are heavily reliant on cheap power.

Germany’s total carbon dioxide (CO2) emissions reductions over the past decade have outpaced those of broader Europe, giving the impression that the entire country is engaged in an aggressive pollution-cutting drive to fulfil its national pledge to be carbon neutral by 2050.

German Federal Environment Agency (Umwelt Bundesamt) emissions data show that national CO2 emissions dropped by 157.7 million tons, or by 18.9%, between 2010 and 2021.

That’s similar to the 154.02 million tonnes (19.2%) in cuts estimated in the latest BP Statistical Review of World Energy over the same period, and places Germany as Europe’s second largest CO2 reducer by tonnage behind the United Kingdom.

But a closer look at Germany’s emissions by source reveals that energy firms and households have done most of the heavy lifting in terms of emissions cuts since 2010, while manufacturers and road traffic have barely moved the needle on CO2 discharge.

Indeed, the energy sector alone accounts for 117 million tonnes, or 74%, of the total CO2 cuts since 2010, while households account for a further 14% of the reduction (22.1 million tonnes).

In contrast, road traffic CO2 emissions were reduced by just 3.5 million tonnes since 2010, while CO2 discharge by industry dropped by only 2.9 million tonnes.

These meagre CO2 cuts by industry and on Germany’s roads may suggest those sectors happily conducted business as usual while the country’s energy industry urgently dismantled outdated coal plants, rolled out renewable power supplies and boosted household heating and cooling efficiency.

But the slow going in terms of industry emissions reductions also suggests scope for quick progress going forward, especially in response to the supply shock since Russia invaded Ukraine in February.

Manufacturers and heavy industry across Germany have made aggressive investments into greener and cheaper power sources this year as they try to plug the supply gap from Russia, while the central government has pledged more than $200 billion to help fund industrial transformation.

Legislators have also fast-tracked power sector reforms to spur additional renewable energy production, especially in the country’s north.

The outlook for Germany’s auto fleet - and its associated emissions - is less upbeat.

The country plans to drop subsidies for electric vehicle purchases from next year as they were deemed no longer necessary by the increasingly cash-strapped government.

Meanwhile, car makers remain overwhelmingly reliant on fossil fuels for power, and so may be forced to slow production of electric and traditional vehicles alike amid the enduring energy crunch, despite continued strong demand for cleaner cars.—Reuters


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