Sabine Mauderer: Green transition in Germany - short-term needs
and long-term opportunities
Speech by Dr Sabine Mauderer, Member of the Executive Board of the Deutsche
Bundesbank, at the KfW "Capital Markets Conference on Energy Transition for
Germany", Frankfurt am Main, 9 July 2024.
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1 Introductory remarks
Ladies and gentlemen,
Last Friday, we found out that Germany is not going to be the next European football
champion. Unfortunately. But what I can tell you today is that - fortunately - Germany is
the European champion when it comes to registered patents. And it is competing at the
top level globally, too.
As you know, Germany has been through challenging times in recent years: 2020
marked the beginning of the global COVID-19 pandemic that triggered a severe supply
shock. In early 2022, war broke out in Europe, causing, first and foremost, immense
human suffering in Ukraine, but also economic disruption across the continent.
At that time, it also became painfully clear how dependent Germany had become on
importing fossil fuels. This also translated into higher prices. In October 2022, inflation
in the euro area reached an all-time high of 10.6%.
2 Situation today
So, let's have a look at the situation today. We overcame the pandemic, thanks in part
to a vaccine developed in Germany. And as for the economic fallout, luckily only a small
percentage of companies went bust.
This year, the economy has started to pick up again. The Eurosystem managed to bring
inflation in June down to 2.5%, less than two years after inflation peaked.
Representatives from twenty different European countries worked together to set
monetary policy in a way that brought euro area inflation back towards its 2% target.
This shows that Europe works!
I expect the same dedication to complete the capital markets union.
At the same time, the labour market has been robust. According to Eurostat, the
unemployment rate in May is stable at 6.4% in the euro area, and just 3.3% in Germany.
1
German businesses are well aware that international recruitment is needed to
manage the demographic challenges. Numerous CEOs have made that very clear.
Our political system in Germany is an anchor of stability. These days, we all know how
important that is, also from an investor's point of view.
Furthermore, Germany's fiscal situation is sound. It allows for considerable public
support to be provided for the transformation, including support to press ahead with the
energy transition. For some of you, fiscal soundness might sound boring. Especially if
you are keen to benefit from attractive tax deduction programmes. But please bear in
mind, that debt-financed tax deduction programmes have their limits.
After Russia's invasion of Ukraine, Germany accelerated its energy transition. There
was no alternative because Germany has no primary fossil fuel sources of its own.
So Germany had to do two things:
1. increase energy efficiency and
2. increase the supply of renewable energy in Germany.
There is good news in this regard: Wind and solar energy are competitive today. Costs
have dropped more than 80%.2
Germany is the most important country for patents in the field of clean and sustainable
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innovation in the European Union. Public and private R&D spending in Germany
exceeds 3% of GDP, which is among the highest R&D intensities in Europe.4
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As a result, we are a global leader in hydrogen patenting. This matters, because
German industry requires hydrogen.
However, getting from scientific innovation and patents to running a business requires
entrepreneurship and money. We need private investors, because public money has its
limits. One of the key factors that influences investors' decisions is uncertainty. Many
investors fear a global backlash against climate policies. At the same time, we are
seeing the share prices of oil and gas companies increase.
So, please allow me to finish my intervention today by reflecting on political
uncertainties, particularly on the global backlash against climate policies.
To us central bankers, and hopefully not only to us, the figures describing the impacts
of climate change are clear. Global warming comes with a significant price tag. In many
countries, we are seeing inflation go up on the back of climate change. Food prices are
skyrocketing due to droughts, floods or other weather events. According to a study by
the ECB and the Potsdam Institute for Climate Impact Research (PIK), global food
inflation could increase up to 3.2% annually by 2035.6
The Network of Central Banks and Supervisors for Greening the Financial System
(NGFS), which I have the privilege to chair, is going to publish a study illustrating how
climate change will affect monetary policy. This study shows that extreme weather
events will have a strong impact, first on the supply side, then on the demand side and
finally on the financial system.
Let me emphasise that the costs of climate change for our economies will become so
great that, at some point, we will see climate policy action. It is just a matter of time.
3 Concluding remarks
Ladies and gentlemen,
I started my intervention with football and I would like to end on that note. Germany is
not going to be the next Euros champion.
But, more importantly, our team have shown they can compete at an international level.
The same can be said of our economy.
Thank you!
1
See Eurostat, Euro area unemployment at 6.4% , July 2024.
2
See for example the "Lazard Levelized Cost of Energy+" database, Levelized Cost of
Energy+ , June 2024.
3
See Falck, O. and Akash Kaura (2023), Green Skills in German Manufacturing,
CESifo EconPol Policy Brief 55. Germany stands out within Europe as the largest single
contributor, accounting for nearly 37% of Europe's international patent families (IPFs) in
cleantech, followed by France and the UK with 14.5% and 8.5%, respectively. See also
European Patent Office and European Investment Bank (2024), Financing and
commercialisation of cleantech innovation, April 2024.
4
See Eurostat, R&D expenditure - Statistics Explained , March 2024.
5
Germany accounts for nearly half of all hydrogen-related IPFs in the EU. See also
European Patent Office and International Energy Agency (2023), Hydrogen patents for
a clean future: a global trend analysis of innovation along hydrogen value chains,
January 2023.
6
Kotz et al. (2024): Global warming and heat extremes to enhance inflationary
pressures, Communications Earth & Environment, Vol. 5 (116).