While it went mostly unnoticed by the general public, Germany entered into a wide-reaching commitment in December 2019. The first German Climate Protection Act is nine pages long and has one core message: the country will be greenhouse gas-neutral by 2050.
What started with the signing of the Paris Climate Agreement is now anchored here in national legislation. The strategy that had been laid out since 2010 in the Energy Concept for an Environmentally Friendly, Reliable and Affordable Energy Supply was to decrease emissions by ‘at least 80’ or ‘80 to 95 per cent’. The goal is now ‘Greenhouse Gas Neutrality by 2050’. Or even better: down to the net zero line.
How can this be achieved? How do we define the zero line? What frameworks are needed for this? A clear plan was outlined in December 2019: starting in 2020, work flat out on new legal frameworks in Germany and Europe, massively expand funding, push innovations, develop concrete solutions for a wide range of economic areas and roll out a particular strategy to develop and expand a hydrogen economy.
Black swan, white swan
And then the coronavirus hit. The rapid spread of the COVID-19 pandemic has been described by some as a ‘black swan’ – a rare occurrence that is highly unlikely and can have extreme consequences. The term comes from a book by publicist Nassim Nicholas Taleb, who is reluctant to classify the coronavirus pandemic as a ‘black swan’, however. A global pandemic is clearly described in his book as “an event that is certain to happen at some point,” he writes in the Neue Zürcher Zeitung newspaper. This means that COVID-19 is a ‘white swan’.
But whether it’s black or white, the virus is having enormous consequences, with once flourishing companies sliding towards insolvency and millions of people fearing for their jobs. The economic consequences of the pandemic are immense, and its medium- to long-term effects are difficult to foresee.
That said, the crisis has also spawned new ideas. It is challenging what we considered to be certainties. The switch to working from home has been a success in many companies and has triggered a push towards digitalisation. The amount of air traffic and the number of people travelling, both for professional and personal reasons, are experiencing a massive decline, and meetings are mainly taking place via a digital medium. Many are convinced that these effects will continue to have an impact after the threat of COVID-19 has passed. Combined with the decrease in energy consumption as a result of the economic slump, this could have unexpected consequences for Germany: the long since abandoned climate target for 2020 – a 40 per cent reduction in carbon compared to 1990 – is within reach. As a matter of fact, on an international level, COVID-19 has caused the largest temporary decrease in greenhouse gas emissions out of all the crises that have occurred in recent decades.
Getting out of the crisis with climate action
An initial concern that the pandemic might push the energy transition and climate action into the background didn’t come to pass. Action is still being taken – sometimes even more decisively than before the crisis. According to former President of the Wuppertal Institute for Climate, Environment and Energy Professor Peter Hennicke, the “rate at which people are willing to take action is skyrocketing and there is a distinct social acceptance for large-scale intervention – also in terms of the grander ambition required when it comes to climate action.”
Back in April 2020, German Chancellor Angela Merkel committed to a clear course of climate action to get out of the crisis. “Europe will be the world’s first climate-neutral continent by 2050,” emphasised Merkel, echoing the statement made by President of the European Commission Ursula von der Leyen. Merkel went on to say it was important “that we don’t save on climate action, but that we invest in climate action,” referencing the COVID-19 economic stimulus programmes. UN Secretary-General António Guterres also made an appeal to the international community: “If we use taxpayers’ money to save the economy now, then green jobs and sustainable growth must be created. Bailouts must not be used to protect outdated, environmentally harmful industries.”
The economic stimulus packages that were adopted at national and European levels by the summer of 2020 enable unprecedented levels of investment in climate action and the energy transition. The German federal government’s COVID-19 package from June 2020 amounts to over €130 billion. According to an analysis performed by dena and consulting firm Navigant, 20 of the package’s 57 measures are related to climate and energy policy. The level of financing is estimated at up to €56 billion and is to be used, for instance, to fund sustainable mobility, expand the digital infrastructure or strengthen the integrated energy transition. This is supplemented by the funds from the German federal government’s climate package adopted in 2019, which adds a further €55 billion and around €40 billion for structural change in coal-mining regions.
And looking at the European level, the ‘Green New Deal’ is in place, despite all the challenges: in her first State of the Union address in September 2020, President of the European Commission Ursula von der Leyen confirmed that the EU climate target for 2030 will increase from 40 to 55 per cent compared to 1990. “We will also dedicate 37 per cent of the NextGenerationEU spending directly to the European Green Deal,” she announced. That comes to a total of nearly €300 billion from the European economic stimulus programme.
What does climate neutral actually mean?
The basic principle is tantalisingly simple, but the reality is complex. This can be seen in the number of terms and definitions alone: climate neutrality, greenhouse gas neutrality or carbon neutrality are often used as synonyms. In fact they describe different concepts. All of the approaches refer to a balance between emissions and sinks. However, the exact position of the zero line can vary massively:
CLIMATE NEUTRALITY in its broadest form means: All man-made (anthropogenic) and natural factors influencing the global temperature increase must be offset. This allows the average global temperature to remain unchanged as a result. The relevant factors include, for instance, air pollution – caused by soot or particulate matter, cloud cover and the albedo of the Earth’s surface.
GREENHOUSE GAS NEUTRALITY describes a state in which a balance is struck between anthropogenic greenhouse-gas emissions and sinks. The Paris Agreement defines greenhouse gas neutrality as a general goal of “(...) [achieving] a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century (...).” Alongside carbon dioxide (CO2), greenhouse gases also include methane, nitrous oxide, various fluorides and fluorinated hydrocarbons.
CARBON NEUTRALITY is the least ambitious as it only refers to offsetting carbon dioxide emissions, not the other greenhouse gases.
There are also different approaches as to how a state of neutrality can be established. Offsetting by purchasing emission rights is a rather weak option. The proceeds are used to fund activities that reduce emissions in other areas such as reforestation. However, it’s difficult to balance these mechanisms universally. Direct offsetting through negative emissions is considered to be more effective, either through natural carbon sinks such as oceans and forests or through technologies that capture greenhouse gases from the atmosphere.
You can read a detailed description of the various approaches in dena’s analysis ‘Climate Neutrality – A Concept with Far-reaching Implications’ (Klimaneutralität – ein Konzept mit weitreichenden Implikationen).
Mapping out paths to the zero line
dena pilot study – Towards Climate Neutrality (Aufbruch Klimaneutralität)
The aim of the new pilot study is to identify transformation paths that can be used to achieve an integrated, greenhouse gas-neutral energy system. It is intended to provide stakeholders with a strategic orientation on which to align their business activities and to give policymakers concrete recommendations for laying out the roadmap. This follows on from dena’s Integrated Energy Transition (Integrierte Energiewende) study published in June 2018. As with the first pilot study, partners from the scientific, political and business communities will be involved so as to acquire as many industry and expert perspectives as possible. Publication of the final report is planned for autumn 2021.
Learn more at www.dena.de/en/integrated-energy-transition
The economy has received its first round of stimulus measures. And if the 27 EU states also formally adopt the joint goal of becoming climate neutral by 2050 by the end of 2020, the existing target trajectories will have to be adjusted to compensate. Otherwise, the curve would be too steep from 2030 onwards to say with any certainty that the zero line will be hit in 2050. This might mean that Germany will need to be more ambitious than reducing carbon by ‘at least 55 per cent’ by 2030 as laid out in the German Climate Protection Act.
And that’s before factoring in the country’s less-than-perfect starting position: the rate at which renewable energies are expanding is not where it should be. In 2019, only 325 new wind turbines with a capacity of 1,100 megawatts were built in Germany. An increase of at least three times this capacity would be required per year to achieve the target of a 65 per cent share of renewable energies in 2030. The industry blames a lack of space and lengthy approval procedures. Slow grid expansion, a refurbishment rate that is too low and stagnant emissions in the transport sector complete the picture.
If Germany is serious about achieving this major goal, then it needs to lay out a roadmap and find solutions quickly, as well as provide clarity as to how climate neutrality is defined and which routes lead to the zero line. Enter dena with its pilot study, Towards Climate Neutrality (Aufbruch Klimaneutralität), which was started in 2020. The study is intended to provide companies with strategic orientation so they can align their business activities with the goal of a climate-neutral society and to give policymakers concrete recommendations for laying out the roadmap. “We want to help address the discrepancies between the ambitious goal of climate neutrality and the as yet limited success in getting there and, if we can, also help resolve these discrepancies,” says dena’s Chief Executive Andreas Kuhlmann.
Similar to the previous study conducted in 2018, the new dena pilot study again aims to present the transformation paths leading to an integrated, climate-neutral energy system. The way the study is designed continues the model of looking at mobility, building and energy industry development in terms of sectors and supplements it with the cross-sector research areas. “As with the first pilot study, we’re relying on working together with partners from the scientific, political and business communities to build up an overall picture from as many industry and expert perspectives as possible,” says Hannes Seidl, dena’s Head of Division for Energy Systems and Energy Services.
The aim is to design feasible transformation paths and, despite all the challenges, to show that climate neutrality “can be an innovation driver for Germany as a business location,” adds Christoph Jugel, Head of Energy Systems at dena. He is convinced that “using process technologies that generate very few greenhouse gases or that are climate neutral, as well as using negative-emission technologies across the board and at an early stage, opens the door to major commercial and industrial opportunities.”
Some companies have recognised this and are leading the way. Chemical group Bayer, for instance, is aiming to become climate neutral by 2030. The traditional company, which employs over 100,000 members of staff worldwide, has committed to the goals of the Paris Agreement of limiting global warming to significantly below two degrees Celsius. Bayer CEO Werner Baumann stated in the German-language business newspaper Handelsblatt that companies can’t wait for national climate policy: “the priority isn’t what governments ask us to do, but what we identify as the right thing to do.” As Baumann stresses, business must be even more resolute in acknowledging its responsibility for climate action. Bayer is planning to reach the zero line by implementing energy efficiency measures and switching to electricity generated from 100 per cent renewable energies. It intends to offset any remaining emissions with certificates benefitting climate action projects.
Even Silicon Valley tech giant Apple is targeting climate neutrality by 2030 and wants its suppliers to do so, too. One of these is German battery manufacturer Varta, which supplies the button batteries for AirPods, Apple’s wireless earbuds. Apple is committed to manufacturing energy-efficient products, a carbon-free aluminium production process, green electricity and offsetting measures such as reforestation in Kenya and the preservation of forests and mangroves in Asia and America. Other tech companies such as Microsoft or Germany’s 1&1 want to switch their power supply completely to electricity generated from wind and solar power.
Most companies are following the same approach to planning as Apple and Bayer and are using a wide range of measures to do so. These include saving energy in production, recycling and using electricity from renewable energies, as well as carbon credits from reforestation programmes and other offsetting measures that avoid carbon or recapture it. Yet everyone knows that offsetting cannot be anything more than an interim, niche solution – it is not enough to solve the global problem of climate change.
A look at each individual industry provides an idea of just how high the hurdles are on the road to climate neutrality. Take the property industry, for instance. There has been a distinct lack of success in terms of climate action here despite the high heating oil prices that have occurred at times in recent years. According to the German Institute for Economic Research (DIW Berlin), the heating energy demand in blocks of flats remains at an average of 130 kilowatt hours per square metre of heated living space per year – the same as it was in 2010.
“This demonstrates that although carbon pricing in the building sector is an important instrument, financial incentives alone are not enough,” says Christian Stolte, dena’s Head of Division for Energy-Efficient Buildings. Especially, he continues, seeing as it’s not socially acceptable to put rent prices up arbitrarily due to rising energy prices. Stolte is also calling for intensive energy consultations for homeowners to draw attention to the attractive subsidies for insulating the building envelope, sturdy windows and heating systems based on renewable energies. “An individual refurbishment roadmap shows you the best route to making a building efficient. A good building envelope, efficient technology, heat pumps, solar thermal energy, wood-fired heating or even heating grids are appropriate parts of this,” he adds.
In search of game-changing technologies
While the housing industry already has a plethora of technologies at its disposal, some industries are just starting out. Cement factories are responsible for up to eight per cent of the world’s total greenhouse gas emissions due to the calcium oxide they burn. In Germany, this figure is two per cent, according to the trade association VDZ (Verein Deutscher Zementwerke). All of the approaches designed to bring this number down are still in the research stage.
The steel industry is also facing major challenges. Many of the 84,000 people who work in the industry in Germany are employed at one of the eight steel mills with furnaces, steel works and rolling mills throughout the country, from Bremen to Völklingen. Not only do these steel mills consume 24 terawatt hours of electricity annually, they also emit 50 million tonnes of carbon – mainly because iron ore is converted into pig iron using coke, making it carbon free. Technically, steel could also be produced by reducing the iron ore with hydrogen, but that would cause the price of steel to skyrocket from a reasonable €500 per tonne to €800–950 and quickly force German steelworkers out of the market. That’s why the German federal government has made it clear in its steel action plan that it wants to promote the introduction and expansion of climate-friendly technologies. The idea is that green steel ‘made in Germany’ in the mills where steel is recycled in electric arc furnaces will become a leading export in the future. Individual facilities such as ArcelorMittal steel mill in Hamburg should lead the way by setting a good example. The company expects to receive investment grants of more than €50 million on top of another €120–200 million per year to offset the additional costs. ThyssenKrupp also wants to make its blast furnaces climate neutral using green hydrogen and build its own hydrogen infrastructure to reduce coke. The International Renewable Energy Agency (IRENA), however, recommends reducing the coke at its source and where green hydrogen could easily be produced using solar power: in Australia.
A neutral takeoff
The aviation industry is also experiencing some turbulence on its journey towards a climate-neutral future. Its share of greenhouse gas emissions is between two and five per cent, depending on whether you look at just the carbon emissions themselves or whether you factor in their impact on the upper layers of the atmosphere as well. Airlines such as Lufthansa are offering their customers the option of voluntarily offsetting their carbon emissions, but this is merely a short-term solution – new technologies are what are needed in the long term. European aircraft manufacturer Airbus has promised the first commercial zero-emission aircraft with a capacity of up to 200 passengers for 2035. “It’s going to cost us billions of euros. We can’t do it by ourselves,” says Glenn Llewellyn, VP, Zero Emission Aircraft. Hydrogen is at the centre of things here, too: “it’s the fuel that a huge number of industries need,” says Llewellyn.
The ultimate fuel to reach the zero line?
Whether it’s as storage for surplus wind and solar electricity, as fuel in a small-scale fuel cell power plant in the basement or as a fuel for aircraft, ships, trains and heavy goods vehicles, hydrogen is supposed to fill the many gaps that the move away from fossil fuels is opening up. “Hydrogen is the crude oil of tomorrow,” says German Minister of Research Anja Karliczek.
The miracle fuel’s untapped potential is spurring people into action: President of the European Commission von der Leyen wants to create European ‘hydrogen valleys’ as a modernisation programme for the economy and to revitalise rural regions. The German federal government’s hydrogen strategy is more specific in its proposals: hydrogen produced in a way that doesn’t damage the environment should help to reduce carbon emissions in areas where there is little room left to optimise energy efficiency further or use more electricity from renewable energies directly, such as in industry and transportation, for instance. To make this happen in Germany, power generation plants are going to be ‘built on an industrial scale’ and a market for carbon-neutral hydrogen is going to be established, which will create more than five million jobs.
A framework for the zero line
“We need to remove the current restraints in order to drive the integrated energy transition, by which I mean increasing the use of electricity in the heating and transportation sectors, and the starting point for this is a competitive electricity price that isn’t weighed down by high levies.”
Innovations are needed to overcome the technological challenges in the industries and sectors. But innovation is in just as much demand when it comes to the political framework as well. Economists such as member of the German Council of Economic Experts Professor Veronika Grimm even speak of the need for a ‘paradigm shift’ to introduce the right incentives to reach the ultimate goal of climate neutrality.
Up to now, the framework for the energy transition and climate action in Germany has been characterised by an overabundance of small-scale regulations that are managed and adjusted in increasingly complex procedures. The German Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG) alone contains over 100 paragraphs and quite a number of regulations. There are regulations on energy efficiency for homes, household appliances and waste incineration plants. Greenhouse gases from cars, chainsaws, trains, aircraft and even barges are also subject to painstakingly meticulous legislation that regulates individual emission standards.
That’s why there has long been a consensus among economists that change is needed in two major areas. One is that the system of taxes and levies in the energy sector needs to be reorganised, and the other is that there needs to be a focus on market-based instruments such as carbon pricing and carbon trading.
As a first step towards reforming the levy system, dena, together with the FiFo Institute for Public Economics at the University of Cologne and the Foundation for Environmental Energy Law (Stiftung Umweltenergierecht), has proposed lowering the EEG surcharge to zero. Among other things, the electricity tax will be increased to finance this. This move could increase the scope for investment in climate neutrality, clean up the regulation system and remove the hurdles standing in the way of new business models.
The second area: a universal carbon pricing system. Starting in 2021, Germany has launched a national trading scheme for fossil fuels in the heating and transportation sectors. Prices start at €25 per tonne of carbon, which will then gradually increase over the following years to a maximum of €65 in 2026.
Prices in European emissions trading are also going up. The EU had decided to reduce the total quantity of emission rights gradually by 2.2 per cent per year from 2021 even before the pandemic. As it stands, this is only in place until 2030 – emission rights must be restricted further to meet the EU’s new, long-term climate goals. This will likely affect the 11,000 plants in the energy industry, energy-intensive industry and (since 2012) intra-European air traffic, which combined are responsible for around 45 per cent of the EU’s carbon emissions, first.
Negative emissions to produce a positive result
As has been shown in this article, there are a few elements that are essential to reaching the ultimate goal of climate neutrality – more urgency in renewable energies and energy efficiency, using hydrogen in a wide range of applications and a sound market economy framework. But they are not enough, as there will still be emissions in 2050 that can’t be avoided, for instance methane and nitrous oxide produced by agriculture and process emissions from industry. This is where other factors come into play: carbon sinks, carbon capture and storage (CCS) and carbon capture and utilisation (CCU) (see Interview).
The Intergovernmental Panel on Climate Change (IPCC) includes provisions that make it mandatory to extract carbon from the atmosphere in almost all of its scenarios for the future – a fact that has long gone unnoticed. This is a delicate subject in Germany after operators of coal-fired power plants tried to save their old piles from the impending phase-out of coal-fired power generation in the 2010s by using CCS – and failed due to the resistance put up by people at the sites.
This conflict has now been resolved thanks to the confirmation in 2020 that coal-fired power generation will be phased out, opening up an opportunity for a new beginning. In a joint article for ZEIT Online, dena’s Chief Executive Kuhlmann and Oliver Geden, Senior Fellow at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik, SWP), insist that Germany urgently needs a discourse based on facts, more research and expertise and a carbon storage strategy. 90 to 95 per cent of greenhouse gas emissions could be avoided by implementing various climate action measures. This would then leave the remaining five to ten per cent that cannot be avoided, which for Germany amounts to around 60 to 120 million tonnes per year. That’s two to four times more than is currently being captured from the atmosphere via reforestation and better forest management.
Ultimately, the future depends on both these elements working in tandem: reducing as many emissions as possible as well as extracting as many of them as necessary from the atmosphere – and in the end, hitting the zero line.
“We could start storing carbon in farmland right away”
Scientist Jessica Strefler from the Potsdam Institute for Climate Impact Research (Potsdam-Institut für Klimafolgenforschung, PIK) is conducting research on carbon sinks and negative emissions, i.e., using natural and technological methods to remove carbon from the atmosphere.
Carbon sinks have been in IPCC reports for years. Why are they becoming an issue now?
JESSICA STREFLER: Without negative emissions, it’ll be difficult to meet the two-degree goal. Germany and the EU have decided that they want to be greenhouse-gas-neutral by 2050. To bring net emissions down to zero, we will need to remove carbon from the air. This is because emissions in agriculture or in industries such as aviation, heavy goods transport, glass, concrete and steel can’t be avoided completely.
What options are there to do this?
STREFLER: We have a lot of options available to us. One of those is, of course, reforestation or increasing the density of existing forests. Another option is storing carbon in soils, for instance by cultivating farmland and fields more carefully, leaving crop residues behind or using cover crops. This increases the organic carbon content in the soil and removing the carbon from the atmosphere can be combined with ecological benefits. Technological methods such as Direct Air Capture (DAC), in which carbon is filtered out of the air and stored geologically, on the other hand, are very energy intensive. Of course, this energy would have to be generated in a carbon-neutral way. In Iceland, for example, there is a plant that captures carbon in basalt rocks using electricity from a geothermal power plant. With any technology, we need to take a close look at costs, scalability and environmental sustainability.
At what stage are the methods you mentioned in their development? And which ones are economical?
STREFLER: We could start storing carbon in farmland right away. We can’t go wrong with this from an ecological point of view either. That said, this solution can’t be scaled up endlessly as the soils can only absorb a certain amount. In contrast, extracting carbon from the air using technological methods can permanently capture huge quantities of carbon. The downside is that the costs are still extremely high right now. Other methods are still in the research stage. For instance, using fibres produced by carbon dioxide in concrete would be interesting.
How does the footprint of carbon sinks compare to avoiding carbon emissions?
STREFLER: We’re only going to meet the climate targets if we avoid emissions. Renewable energies and other technologies for avoiding carbon are the more favourable solutions by far. The sinks that we’re talking about today are only beneficial for emissions that are very difficult to avoid. If we wanted to recapture the 40 billion tonnes of carbon emitted globally each year using DAC right now, we would have to build an industry that is ten times the size of today’s crude oil industry – and which would consume almost all of the energy produced in the world today.
What role does the carbon pricing system have to play?
STREFLER: The emissions trading price is the benchmark for whether a technology is economical. This also applies to carbon sinks. Technologies that extract carbon from the atmosphere are only economical if they are cheaper than avoiding emissions – that means if they cost less than the carbon price.
Header picture: shutterstock/Thawatchai Thandee