Germany Touts Green Stimulus in Post Covid-19 Policy Push

Germany’s green energy shift may get a financial shot in the arm when the impact of the coronavirus ebbs, according to a senior member of Chancellor Angela Merkel’s cabinet.

When the virus’ acute phase is over, the government plans a stimulus package that advances the nation technologically and helps the economy’s move toward climate neutrality, Finance Minister Olaf Scholz said in an interview with Funke Mediengruppe. Such a package “makes sense,” said the Social Democrat without adding details.

Such a move would allow Germany, Europe’s biggest emitter of greenhouse gases, to exploit a positive environmental quirk of Covid-19’s affect on the economy: plummeting CO2 emissions, said Patrick Graichen, executive director of the Agora Energiewende think tank in Berlin.

“What counts for the climate is sustainable reduction in emissions, not a one-time drop,” Graichen said by phone. “We need a green growth and investment program fast. For sure, once the crisis is over, emissions will soar again.”

To make an impact, a green stimulus program should be of the order of 100 billion euros ($108 billion), said Graichen.

Europe’s biggest economy may slump by 5% this year, according to the government. That’s an ironic boon to the output of pollution and will allow Germany to over-achieve its goal of cutting carbon emission 40% from 1990 levels by the end of the year, according to Agora.

Germany was set to miss the target after pushing down emissions by about 35% in 2019. Agora estimates that it may reduce emissions by as much as 45% by December.

The drop in CO2 has a negative side. Prices for pollution certificates in the European Union’s emissions trading system have fallen almost a fifth this year as measures to deal with the coronavirus cripple the region’s economies. Emissions in the European market are seen dropping another 15% this year after falling almost 10% last year.

Scholz, the finance minister, earmarked some 33 billion euros of revenue from the sale of EU emission permits and from a separate national carbon trading system to help pay for a sweeping 54 billion-euro climate-action plan rolled out by Merkel last year. The anticipated revenue may need to be recalculated if permit prices remain in the doldrums.

To contact the reporters on this story:
Brian Parkin in Berlin at bparkin@bloomberg.net;
William Wilkes in Frankfurt at wwilkes1@bloomberg.net;
Mathew Carr in London at m.carr@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at landberg@bloomberg.net

Andrew Reierson, Jeremy Hodges

© 2020 Bloomberg L.P. All rights reserved. Used with permission.