Germany's recent debate on industrial competitiveness, climate policy and the country's climate-neutrality target has gained renewed momentum following the CDU's internal workshop on the future direction of climate policy.
In a joint statement, Ottmar Edenhofer, Andreas Löschel, Stefan Kolev and Bernd Weber argue that the current debate risks focusing on the wrong question. Rather than revisiting whether Germany should achieve climate neutrality by 2045 or 2050, policymakers should concentrate on the upcoming reform of the EU Emissions Trading System (ETS), which they describe as the decisive economic and industrial policy challenge of the coming years.
A strong EU Emissions Trading System is not at odds with industrial competitiveness – it is the foundation of a competitive industrial strategy.
According to the authors, Germany's key economic challenges – weak investment, high energy costs and growing geopolitical uncertainty – cannot be addressed by changing the climate-neutrality target. Instead, the crucial question is whether Europe can mobilise the investments needed for industrial transformation while maintaining competitiveness and preventing carbon leakage.
The statement argues that the 2026 reform of the EU ETS will be pivotal in determining whether Europe succeeds in strengthening its industrial base while delivering on its climate objectives.
Four priorities for ETS reform
The authors propose strengthening rather than weakening the EU ETS and outline four priorities for reform:
- Strengthen carbon leakage protection
- Use free allocation more strategically to incentivise industrial investment
- Increase flexibility through carbon removals and international cooperation
- Recycle ETS revenues more effectively to support industry and citizens
Signatories
- Prof. Dr. Ottmar Edenhofer Director of the Potsdam Institute for Climate Impact Research (PIK) and Chair of the European Scientific Advisory Board on Climate Change (ESABCC)
- Prof. Dr. Andreas Löschel Professor of Environmental and Resource Economics at Ruhr University Bochum and Chair of the German Government's Expert Commission on Energy
- Prof. Dr. Stefan Kolev Academic Director of the Ludwig Erhard Forum for Economy and Society and Member of the Scientific Advisory Council to the German Federal Minister for Economic Affairs and Energy
- Dr. Bernd Weber Founder and CEO of the Berlin- and Brussels-based think tank EPICO. Prior to this, he led Industrial, Energy and Environmental Policy at the Economic Council of the CDU (Wirtschaftsrat der CDU)