German emissions fall by a fifth amid stagnant industrial output

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Germany’s greenhouse gas emissions dropped by about a fifth last year to their lowest level since the 1950s, although the reduction mostly came from stagnant industrial output in Europe’s largest economy rather than improved energy efficiency.

The country emitted 673mn tonnes of carbon dioxide equivalent in 2023 — or 21 per cent less than the previous year, according to Berlin-based think-tank Agora Energiewende’s annual review of Germany’s energy transition.

Roughly half of this drop, which Agora said reflected a “sharp” decline in coal-fired power generation, could be attributed to a slowdown in German industrial activity. Only 15 per cent stemmed from technology improvements such as greater use of renewable energy.

German industry, which makes up a fifth of the country’s overall output, almost double that of the US, France and the UK, was badly hit by the outbreak of war in Ukraine, which stymied flows of cheap Russian gas.

While Germany has been among the developing countries leading the charge in cutting emissions, the latest decline comes as many of its companies struggling with the energy crisis are slashing their short-term investments or preparing to shift production abroad.

The world’s biggest chemical group, BASF, for example, has announced permanent cost cuts at its Ludwigshafen headquarters because of high energy prices.

German vice-chancellor Robert Habeck welcomed the figures published by Agora, noting that in 2023 more than half of the country’s electricity supply had been generated from renewable sources.

But he acknowledged that much of the decrease in fossil fuel use was due to slowing industrial production — an issue of mounting concern for Berlin.

“A distinction must be made when it comes to the decline in emissions in industry . . . the Russian war of aggression and the [energy] price crisis are leading to declines in production. My goal as economics minister is that Germany remains a strong industrial location and becomes climate-neutral,” he said.

Speaking at a press conference in Berlin on Tuesday, the president of Germany’s industrial lobby, the Federation of German Industries, said the government was failing to understand how “critical” the situation facing manufacturing businesses in the country was.

As a result of rising energy costs, industry in Germany could not hope to be both green and internationally competitive without far greater government support, said Siegfried Russwurm.

“We are no longer talking about short-term economic dips that will correct themselves, but rather about structural problems in Germany as a location,” he added. “Concrete measures that actually improve the situation of companies in global competition are unfortunately still missing.”

Agora said that, while preliminary figures showed German economic output dropped 0.3 per cent in 2023, the equivalent figure for energy-intensive production in industries such as chemicals and steel was 11 per cent.

“If emissions are simply relocated abroad, nothing will be gained for the climate,” warned Simon Müller, director of Agora Energiewende’s branch in Germany. Industry needed a more stable framework to invest in climate-friendly technologies such as green steel and the switch from gas to electricity when generating heat for industrial processes, he added.

Berlin was in November thrown into a budget crisis after a court struck down a €60bn climate fund designed to modernise Germany’s industry and speed up the transition to green energy, deeming it to be in breach of the country’s strict rules on government borrowing.

Müller said the court ruling had made financing for climate protection measures more difficult, adding that Germany still needed an “investment offensive” to achieve long-term goals to reduce the use of fossil fuels, including the rollout of hydrogen pipelines and improvement of electricity grids.

The think-tank added that emissions from construction and transport industries remained largely unchanged in 2023, following several years of failure to reach reduction targets. The lack of emission reductions in the two sectors meant Germany was expected to miss EU-wide goals as set out under the so-called Effort Sharing Regulation, Agora said.

Nonetheless, the 21 per cent drop in emissions last year followed the sharp decline in coal-fired power generation including from highly polluting lignite.

At the same time, almost half of electricity imports came from renewable sources, mainly hydro and wind, and another quarter from nuclear, with a 5 per cent increase in domestic renewable energy thanks to record solar and wind production, taking the share of total renewable energy to more than 50 per cent for the first time.