Janice R. Andrews
As Germany heads into a snap election this month, a heated debate has emerged: should the nation prioritize climate action or economic growth? With jobs, incomes, and a struggling economy dominating political discourse, some experts fear that climate protection measures are being sidelined. But does Germany really need to choose between the two? The stakes are high, and the implications could shape the country’s future for decades to come.
Climate Action vs Economic Growth: A False Dilemma?
Friedrich Merz, chairman of the center-right Christian Democratic Union (CDU) and a frontrunner to become Germany’s next chancellor, recently stated that he would only phase out coal and gas power plants if it didn’t harm German industry. This sentiment reflects a broader trend in the election campaign, where climate action has taken a backseat to economic concerns. Even parties traditionally vocal about climate change have been quieter this time around.
This shift has raised alarms among experts. Claudia Kemfert, an economist and energy expert at the German Institute for Economic Research (DIW), warns, “In the run-up to the federal elections, the climate and the economy are once again being played off against each other.” But is this dichotomy justified? Research from the Climate Alliance, a coalition of German civil society groups, suggests that most Germans want stronger climate action, indicating that the public sees no need to choose between the two.
Is Climate Policy to Blame for Germany’s Economic Woes?
Germany’s economy, the largest in Europe, has shrunk for two consecutive years—a rare occurrence in recent decades. High energy prices, sluggish domestic demand, and weak global trade have hit the country’s export-oriented industrial sector hard. The automotive industry, a cornerstone of the German economy, has announced mass layoffs and declining sales and profits.
However, experts argue that climate policies are not the root cause of these economic challenges. Gunnar Luderer, a scientist at the Potsdam Institute for Climate Impact Research, explains, “The German economy’s problems are of a structural nature and they are deeper.” He points to Germany’s reliance on Russian gas, which became costly to replace after the invasion of Ukraine, as a key factor. High energy prices have driven up production costs for energy-intensive industries like steel and chemicals, while also burdening households with rising bills.
Moreover, Germany’s economic model has struggled to adapt to international competition, particularly from China’s rapid expansion into new markets like e-mobility. “German car manufacturers were quite slow and actually too late to move on this new trend,” Luderer said. As a result, Germany is now playing catch-up in the global race for green technologies.
Overlooked Opportunities: Climate Action as an Economic Driver
Contrary to the narrative that climate protection harms the economy, experts argue that well-designed climate policies can create significant economic opportunities. Kemfert emphasizes, “Clever climate protection measures create enormous economic advantages that are often underestimated.” For instance, expanding renewables, electromobility, and energy-efficient renovations require investments that generate value and jobs.
The renewable energy sector alone has created nearly 400,000 jobs in Germany, with employment growing by almost 15% between 2021 and 2022. The solar and heat pump sectors have seen the fastest expansion. Kemfert warns, “If Germany plays the economy off against the climate, there is a risk of job losses, a loss of competitiveness, and high fossil fuel costs.”
Luderer agrees, highlighting Germany’s potential to lead in green technologies such as wind power, heat pumps, e-mobility, and smart energy systems. “Given the German economy’s strength in manufacturing, machinery, and automotive, there are lots of economic opportunities in becoming a lead player in green technologies,” he said.
Even the Federation of German Industry (BDI), which represents chemical, engineering, and electrical companies, supports climate policies, recognizing that green technologies are crucial for future industrial success. Renewables have also helped stabilize electricity prices, which would have risen far more sharply without them. Niklas Höhne, founder of the NewClimate Institute, explains, “It’s really our dependency on fossil fuels that drives electricity prices up, not the expansion of renewables.”
The Costs of Uncertainty and Inaction
Political uncertainty is another major concern. Several parties have pledged to reverse Germany’s building energy act, which phases out fossil fuel heating systems, and challenge the EU’s ban on new combustion engine cars by 2035. Such reversals could undermine planning security for businesses. Stefanie Langkamp, executive director of politics at Climate Alliance, notes, “Whenever you talk to industry or trade unions, they say that planning security is one of the most important things for setting their ways for the future.”
The heat pump industry, for example, has already invested in hiring and training skilled workers and procuring resources to scale up production. Reversing climate policies could jeopardize these efforts. Langkamp warns, “If you do not invest in climate action today, then you face really huge consequences, both regarding the economy and the cost of climate change.”
A study published in the journal Nature estimates that the global economic damage caused by climate change is six times higher than the investment needed to cut emissions and limit global warming to below 2°C. In Germany alone, extreme weather events like storms and floods caused €7 billion ($7.2 billion) in damages in 2024. These costs are expected to rise if climate action is delayed.
A Global Shift Toward Green Economies
The world is moving toward a climate-neutral economy, and Germany risks falling behind if it hesitates. Langkamp emphasizes, “This is a worldwide movement, and it will not stop. If you do not invest in climate action now, you will have competitiveness problems later.” Luderer adds, “The only option for the German economy is to proactively embrace the challenges and opportunities of the green transition. There is no way back.”
Conclusion: No Need to Choose
Germany does not need to choose between climate action and economic growth. In fact, the two are deeply interconnected. Climate policies can drive innovation, create jobs, and secure Germany’s position as a global leader in green technologies. Conversely, delaying climate action risks economic stagnation, job losses, and mounting costs from climate-related damages.
As voters head to the polls this month, the question is not whether Germany can afford to act on climate change, but whether it can afford not to. The future of the economy—and the planet—depends on the choices made today.
