Ideally, the policies directed to reduce a country’s emissions footprint and general development would go hand in hand with the social aspects of such transformation upfront, ensuring that the less capable not only also profit from the benefits. Still, they won’t be strongly affected by the related costs.
In Germany, the Hans Böckler Foundation (Stiftung) has been working already for quite some time on looking into these questions and pushing for related policies. “Good climate protection serves to preserve Germany as an industrial location, our social security systems, and prosperity and to further expand these. We, therefore, speak of social-ecological transformation. It is “very important that the social-ecological transformation is designed in such a way that good jobs with good pay, fair working conditions, and co-determination aren’t left behind along the way,” says IMK (Institute for Macroeconomy and Conjuncture research, part of the foundation) director Sebastian Dullien. Source: Böckler Foundation
According to IMK Institute analysis, “The transformation requires significant additional resources because simply introducing new rules and carbon pricing is unlikely enough. (..) The state will have to participate in financing a CO2-neutral infrastructure, at least temporarily subsidize the conversion of production in companies, and, above all, ensure social balance – for example, support low-income earners who are massively affected by rising energy prices because they can neither afford a sufficiently insulated apartment nor an electric car.” Source: Böckler Foundation.
However, redirecting needed investments will be difficult, especially for state and local governments under financially restrictive debt brake and fiscal pact EU regulations.
“In 2020, thanks to COVID-related support from the federal and state governments, the municipalities were in a fairly good financial position and had a budget surplus overall. In 2021, they benefited from relatively high tax revenue. According to the IMK analysis, the state budgets, which are closely linked to municipalities through municipal financial equalization and allocations, also appear good “at first glance.” “If the sole aim in the coming years were to overcome the COVID crisis and balance public budgets again, the outlook would be favorable.” However, given the investment backlog and necessary expenditure for climate protection, a “significant financial gap” is becoming apparent: Since the states must comply with the requirements of the – unreformed – debt brake, they lack the money for the necessary allocations to the municipalities. “The biggest shortcoming of the new federal government’s financial policy is now becoming apparent: that it was unable to agree on tax reforms to permanently strengthen revenues for the benefit of states and municipalities.”
A concrete example: “The demand for climate-friendly hydrogen production in Germany is expected to grow faster by 2030 than is often assumed – also because natural gas is partially out of supply due to the war in Ukraine. Therefore, significantly larger domestic green hydrogen production capacities should be created in the coming years than previously intended.” Source: More green hydrogen needed, Böckler Foundation. Thus, the needed financing (between 350 to 500 M€ according to foundation estimates for first costs) and resources for such energy transformation must be at least initially sponsored by the government along with specific measures that ensure working conditions remain favorable.
“Germany needs to generate significantly more renewable energy. However, the expansion of wind energy is stalling. Political decisions such as the tendering policy for wind projects from 2017, aimed at the lowest possible prices, and strict distance regulations in various federal states have left a clear mark. In the years 2017 to 2019, the industry temporarily lost more than 40.000 jobs – and with them a lot of know-how. In order to strengthen the wind industry again, better working conditions are necessary”, according to a study from the IMK Institute. Source: Green energy needs good working conditions.
Thus, several currently active regulations may be rethought in the framework of climate mitigation policies for an energy transition, especially. For instance, updating fiscal-related regulations to accommodate and support the massive investment needs of the energy transition and other climate mitigation policies, such as reviewing policies like the German debt brakes and the European fiscal pact, will be needed. Moreover, policies that may affect labor market conditions for the much-needed new energy development -for instance, green hydrogen production- and which also support R&D and upskilling and skilled labor development will need to be developed. Supporting the work of foundations like the Böckler Foundation and its institutes and leveraging their research studies to develop policies would also be beneficial.
This Post was submitted by Climate Scorecard Germany Country Manager Katherine Cote.