Germany can achieve climate-neutral transport at no additional cost

Berlin, 4 July 2024. Full-scale climate neutrality in the transport sector can be achieved by 2045 without additional costs  or mobility losses – but only if the German government acts without delay. This is the key takeaway of a new study by the Berlin-based think tank Agora Verkehrswende. If robust policy action is delayed to 2030, achieving the same level of emissions savings will entail additional costs of some 500 billion euros (+5 per cent). The study’s reference scenario presumes the continuation of existing policy up to 2045. In this scenario, Germany fails to meet its climate targets in transport, and produces 590 million tonnes of additional CO2 emissions.

“The results of our study are clear. Economic considerations alone argue in favour of immediate action to accelerate climate protection in the transport sector ,” says Wiebke Zimmer, Deputy Director of Agora Verkehrswende. “Political hesitation has a price – and this price is measured either in money or emissions. Yet the issue is not merely an economic one. The fate of the biosphere is at stake, and we have an obligation to act under the German constitution and international law. If we frontload the investment required to make the transformation of the transport sector a reality, the overall costs remain the same. What’s lacking above all is political will.”

The wisdom of frontloading investment

If one compares the cumulative expenditure required over the next twenty years, the rapid action scenario is the cheapest – and is even 60 billion euros less expensive than the reference scenario. The study, which was conducted by the economic-policy consulting firm Prognos on behalf of Agora Verkehrswende, estimates the economic costs and investment requirements of transforming the transport sector in Germany up to 2045. The study considers three scenarios: The reference scenario is based on impact assessments published by the German government, and presumes the continuation of current policy. In two target scenarios, more ambitious policy is pursued: starting rapidly with effect from 2025 and beginning delayed in 2030

Both target scenarios presume the same basic strategy for decarbonising transport, and both are associated with the same cumulative emissions. Specifically, both scenarios presume the replacement of ICEs with EVs as well as a modal shift from road to rail and from private cars to buses, trains, shared mobility, bicycles, and walking. Compared to the reference scenario, both of the target scenarios require higher upfront investments – particularly for the expansion of public transport and for EV adoption. In the rapid action scenario, however, annual expenditure fall below that of the reference scenario already in the early 2030s. Greater energy efficiency and a modal shift ensure that less expenditures are required for road infrastructure and vehicles (including maintenance and fuel). 

“A robust commitment to climate protection will pay off in the long term, but it necessitates a solid financing strategy,” says Carl-Friedrich Elmer, Senior Associate for Transport Economics at Agora Verkehrswende. “The political will of the German government is the make-or-break factor when it comes to higher upfront investment. We need immediate and sufficiently large public outlays for climate protection while also ensuring the reliable allocation of funding over the long term. Policymakers must find a solution to make this a reality. It is also up to the German government to ensure favourable economic and regulatory conditions for transformation, including the right incentives for crowding in private-sector investment. A first step would be a reform of car-related taxes, levies, and subsidies so they are closely tied to CO2 emissions while considering all aspects of personal vehicle use, including company-car taxation rules. Policymakers should also consider introducing mileage-based road tolls for cars, and a carbon fee and dividend scheme.”

The modal shift makes all the difference

All three scenarios enable the same level of mobility in terms of distance travelled in passenger and freight transport, and all rely on widespread electric vehicle adoption. However, the target scenarios also envision a significant modal shift. While motorised private transport as a share of passenger transport remains very high at almost 80 per cent in the reference scenario, it falls to below 60 per cent by 2045 in the two target scenarios. This is offset by a corresponding rise in bus and train journeys, which rise to nearly a 30 per cent share. Compared to the reference scenario, reliance on rail and bus transport (in terms of passenger distance travelled) is nearly two and three times as high, respectively. In the target scenarios, the expenditures for the public transport workforce are also significantly higher. While the study did not consider the possible adoption of autonomous buses and trams, such technological innovation could solve labour shortages in the future, and thus save additional costs.

The scenarios differ considerably in terms of the projected size of the national vehicle fleet. In the reference scenario, the number of cars increases from 47 million (2019) to 54 million (2045). Of these, 45 million (83 per cent) will be all-electric. In the target scenarios, the modal shift will lead to the number of vehicles falling to 38 million by 2045. In the rapid action scenario, 33 million (87 per cent) of these are all-electric; in the delayed action scenario, practically all cars must be BEVs by 2045 in order to offset the additional emissions from previous years. Yet this is only possible with the costly decommissioning of combustion vehicles. In addition, it is necessary to deploy expensive synthetic fuels on a large scale. Economic considerations thus clearly speak against the delayed action scenario.

The study takes all direct transport system costs into account, including capital investment costs (e.g. for vehicles, charging stations, and road and rail infrastructure) and operating expenses (e.g. for the labour force, propulsion energy, and maintenance). The study also estimates the climate damage that can be avoided through policy action. However, the study does not attempt to quantify the additional anticipated economic benefits of the target scenarios, such as reductions in air and noise pollution, as this would necessitate significantly more complicated calculations. Accordingly, given a more comprehensive economic assessment, the target scenarios would probably perform even better.