Germany—a pioneer on earthen feet?

Abstract

Germany is one of the two OECD countries having achieved substantial greenhouse gas reductions in the last decade. While a part was large reductions in industry after the economic crash in East Germany, a relevant share is due to the huge public infrastructure investments in East Germany. The real success of German climate policy in the past decade is the strong reduction of methane and nitrous oxide which has been almost unnoticed. German climate policy is a good example of how lobbying of interest groups leads to a complex maze of hundreds of measures whose effects are difficult to evaluate. Paradoxically, policies have focused on expensive measures and Germany clearly is a pioneer in the most expensive forms of renewable energy. Concerning cost-effective measures and market instruments, Germany is a laggard. Only slowly, policymakers start to notice this distortion and first, shaky steps towards a more cost-efficient policy are made. Several challenges such as nuclear phase-out and trends in household energy consumption will put pressure on government to embrace the Kyoto Mechanisms and to refocus domestic instruments well before the first commitment period.