Green Transition

Research and Policy Advice for Structural Change in the German Economy

Dossier, 18.06.2024

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Green Transition

The green transition is a key topic of our time. In a broader sense, it describes the comprehensive change in the German and European economy towards a more sustainable, environmentally friendly and future-proof way of doing business. In a narrower sense, the green transition is understood as a process of generating energy in an increasingly greenhouse gas-neutral way.

This transition is undisputed. It is necessary to combat climate change and offers immense opportunities for innovation, growth and the creation of new jobs in Germany – provided it is strategically planned and implemented correctly.

What is the Green Transition About?

At its core, the green transition is about replacing fossil fuels with renewable energy, increasing energy efficiency and establishing a circular economy.

The green transition requires considerable investment in new technologies and infrastructure as well as adjustments to legislation and regulation. Firms need to change their production processes, develop new business models, and offer sustainable products and services.

On the one hand, economic research and policy advice support areas that are negatively affected by the green transition, such as the German coal-mining regions, which are receiving funding for structural changes. On the other hand, economic research focuses on economic sectors that are growing, such as digitalisation and robotics.

The Role of the Halle Institute in the Green Transition

This structural change affects all areas of the economy, from industry and the service sector to agriculture. Energy-intensive sectors in particular face the challenge of drastically reducing their emissions while remaining competitive.

This structural change requires innovative approaches and close cooperation between business, science and politics. The Halle Institute for Economic Research (IWH) is facing this challenge and is positioning itself at this interface with its research and policy advice.

Among other things, the researchers at the Institute analyse the economic impact of the green transition, evaluate the effectiveness of political measures, and provide important findings for the design of funding programmes and regulations. Through well-founded analyses and forecasts, they contribute to mastering the challenges of structural change and making the best use of its potential.

All of this takes place within a European and international framework: Through networked research projects, conference participation, and the exchange of visiting academics, the Halle Institute's research and policy advice are at the cutting edge. They are linked to other key topics at the institute, including research on business cycles, financial stability, productivity, and demographics.

The European Dimension of the Green Transition

The green transition offers an opportunity to successfully position Germany as a leader in sustainability and innovation. By developing and exporting green technologies and solutions, the German economy can benefit not only ecologically but also economically.

For this to succeed, however, Germany must avoid taking a unique economic path and instead proceed in a coordinated manner across Europe, as it does in other areas. The Halle Institute also advocates market-based instruments to support this process. 

According to the Halle Institute, the European Union (EU) is the key driver of the green transition, along with price incentives. In order to increase public acceptance, CO2 reductions should take place where it is most cost-effective within the EU.

In a strategy paper published on 18 June 2024, entitled “Six Points for an Efficient Green Transition” ("Sechs Punkte für eine effiziente grüne Transformation"), Reint Gropp and Oliver Holtemöller, President and Vice President of the Halle Institute, therefore state that energy production and consumption should not be regulated in a piecemeal manner. Instead, the authors recommend a set of coordinated points for the green transition that are only effective as a package.

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Reint Gropp and Oliver Holtemöller: "Ein Plan zur grünen Transformation" (guest article)
in: Frankfurter Allgemeine Zeitung, 17.06.2024

Oliver Holtemöller: "BASF kehrt Deutschland den Rücken? Ökonomen fordern Reaktion der Ampelregierung"
in: Berliner Zeitung, 31.05.2024

Oliver Holtemöller: "Die Spur der Kohlemilliarden": MDR-Langfristprojekt verfolgt in Echtzeit, wohin Investitionen fließen
in: Mitteldeutscher Rundfunk, 30.11.2023

Oliver Holtemöller: "Wohin fließen die Kohlemilliarden?"
in: Mitteldeutscher Rundfunk, 28.11.2023

IWH: "Von Aktivismus bis zur Kohle: Vielfältiges MDR-Programm zur Weltklimakonferenz 2023 Hauptinhalt"
in: Mitteldeutscher Rundfunk, 24.11.2023

Oliver Holtemöller: "Wirksamkeit der Strukturförderung: Wohin gehen die 'Kohlemilliarden'?" (podcast interview)
in: revierwende.de, 15.11.2023

IWH: "Wie weit ist der Strukturwandel in Deutschlands Kohlerevieren?"
in: rbb Rundfunk Berlin-Brandenburg, 09.11.2023

Oliver Holtemöller: "IWH-Bericht über Verwendung von Milliarden aus dem Kohleausstieg" (Min. 14:00)
in: ARD tagesschau, 18.08.2023

IWH: "Bund stellt Milliardenhilfen für Kohle-Regionen zur Verfügung, doch die werden kaum genutzt"
in: TAG24.de, 17.08.2023

IWH: "Kohleausstieg: Fördermittel nur zu «kleinem Teil» abgerufen"
in: FAZ.net, 16.08.2023

IWH: "Kohleausstieg: Fördermittel nur zu "kleinem Teil" abgerufen"
in: Zeit Online, 16.08.2023

IWH: "Gutachten zu Kohlemilliarden: Mehr Mittel in Verfügbarkeit von Arbeitskräften lenken"
in: Sächsische.de, 16.08.2023

Oliver Holtemöller: "Kohleausstieg - Ein gerettetes Dorf will eine Zukunft" (Min. 11:44)
in: Bundeszentrale für politische Bildung, 06.06.2023

IWH: "IWH startet Studie zur Wirkung der "Kohlemilliarden"
in: Zeit Online, 15.12.2022

Steffen Müller: "Was passiert mit Deutschlands Industrie bei einem Gasmangel?"
in: Spiegel Online, 12.11.2022

Reint Gropp: "Strukturhilfen für Braunkohleregionen: Notwendiger Umbau"
in: taz.de, 07.10.2022

Oliver Holtemöller: "IWH-Studie zum Kohleausstieg: Ohne Abwanderung von Arbeitskräften wird der Strukturwandel nicht vonstattengehen"
in: Leipziger Internet Zeitung, 18.08.2022

Media Cooperation

The “Coal Update” (Das Kohleupdate)

Forty billion euros of taxpayers' money will be invested in Germany's lignite mining regions by 2038. Who will benefit from this funding? And will the investment pay off?

The Halle Institute's expert advice as part of the project "The trail of Coal Billions" (Die Spur der Kohlemilliarden”) by Mitteldeutscher Rundfunk (MDR) and Hoferichter & Jacobs GmbH.

Selected Publications

Events

In addition to research and reporting, the Halle Institute organises events that foster dialogue between politics, business and research. The focus is on topics such as rising energy prices, the restructuring of the German economy, and Germany's role in the European Green Deal.

Projects

Various projects have been and are being realised at the Halle Institute that deal with issues of green transition. These include:

Our experts

All experts, press releases, publications and events on "Green transition"

 

Publications on "Green transition"

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A Multi-Model Assessment of Inequality and Climate Change

Marie Young-Brun et al.

in: Nature Climate Change, October 2024

Abstract

<p>Climate change and inequality are critical and interrelated defining issues for this century. Despite growing empirical evidence on the economic incidence of climate policies and impacts, mainstream model-based assessments are often silent on the interplay between climate change and economic inequality. For example, all the major model comparisons reviewed in IPCC neglect within-country inequalities. Here we fill this gap by presenting a model ensemble of eight large-scale Integrated Assessment Models belonging to different model paradigms and featuring economic heterogeneity. We study the distributional implications of Paris-aligned climate target of 1.5 degree and include different carbon revenue redistribution schemes. Moreover, we account for the economic inequalities resulting from residual and avoided climate impacts. We find that price-based climate policies without compensatory measures increase economic inequality in most countries and across models. However, revenue redistribution through equal per-capita transfers can offset this effect, leading to on average decrease in the Gini index by almost two points. When climate benefits are included, inequality is further reduced, but only in the long term. Around mid-century, the combination of dried-up carbon revenues and yet limited climate benefits leads to higher inequality under the Paris target than in the Reference scenario, indicating the need for further policy measures in the medium term.</p>

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Climate-resilient Economic Development in Vietnam: Insights from a Dynamic General Equilibrium Analysis (DGE-CRED)

Andrej Drygalla Katja Heinisch Christoph Schult

in: IWH Technical Reports, No. 1, 2024

Abstract

<p>In a multi-sector and multi-region framework, this paper employs a dynamic general equilibrium model to analyze climate-resilient economic development (DGE-CRED) in Vietnam. We calibrate sector and region-specific damage functions and quantify climate variable impacts on productivity and capital formation for various shared socioeconomic pathways (SSPs 119, 245, and 585). Our results based on simulations and cost-benefit analyses reveal a projected 5 percent reduction in annual GDP by 2050 in the SSP 245 scenario. Adaptation measures for the dyke system are crucial to mitigate the consumption gap, but they alone cannot sufficiently address it. Climate-induced damages to agriculture and labor productivity are the primary drivers of consumption reductions, underscoring the need for focused adaptation measures in the agricultural sector and strategies to reduce labor intensity as vital policy considerations for Vietnam’s response to climate change.</p>

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Deutschland braucht eine klare wirtschaftspolitische Strategie

Reint E. Gropp

in: Wirtschaft im Wandel, No. 3, 2024

Abstract

<p>Die deutsche Wirtschaft steht unter Druck, doch die aktuellen Maßnahmen der Regierung führen kaum zu einer nachhaltigen Erholung. Unternehmen sind mit Unsicherheiten konfrontiert, die Investitionen hemmen – insbesondere hinsichtlich der Energieversorgung und der damit verbundenen Kosten. Viele Betriebe schieben deshalb notwendige Investitionen auf – genau die Investitionen, die das wirtschaftliche Wachstum antreiben könnten.</p>

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Analyse der Effekte des Atomausstiegs auf die deutschen Großhandelsstrompreise 2023

Christoph Schult

in: Wirtschaft im Wandel, No. 3, 2024

Abstract

<p>Seit dem Atomausstieg am 15. April 2023 sind die Großhandelsstrompreise in Deutschland deutlich gesunken. Innerhalb des deutschen Merit-Order-Systems galten Atomkraftwerke als die kostengünstigste Form der Stromerzeugung. Hätten die Atomkraftwerke weiterbetrieben werden können, wären die Großhandelsstrompreise für den Zeitraum vom 16. April 2023 bis zum 31. Dezember 2023 voraussichtlich um 1% bis 8% niedriger gewesen. Insbesondere im Oktober hätte der Weiterbetrieb der Atomkraftwerke die Großhandelsstrompreise gesenkt, vor allem in Zeiten hoher Stromnachfrage und geringer Verfügbarkeit erneuerbarer Energien.</p>

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Climate Policy and International Capital Reallocation

Marius Fourné Xiang Li

in: IWH Discussion Papers, No. 20, 2024

Abstract

<p>This study employs bilateral data on external assets to examine the impact of climate policies on the reallocation of international capital. We find that the stringency of climate policy in the destination country is significantly and positively associated with an increase in the allocation of portfolio equity and banking investment to that country. However, it does not show significant effects on the allocation of foreign direct investment and portfolio debt. Our findings are not driven by valuation effects, and we present evidence that suggests diversification, suasion, and uncertainty mitigation as possible underlying mechanisms.</p>

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