Germany's CO2 emissions reach their lowest level in 70 years in 2023

The greenhouse gas emissions, according to calculations by Agora Energiewende, have decreased to 673 million tons in Germany in the past year. This represents a 46% reduction compared to the reference year of 1990. While the German government has achieved its annual target, the apparent success is somewhat deceptive, as only about 15% of the savings can be attributed to long-term measures. Agora Energiewende estimates a photovoltaic capacity addition of 14.4 gigawatts in 2023.

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For the 2030 target, Agora Energiewende emphasizes the need for additional efforts, stating that the significant reduction in CO2 emissions in 2023 was only partially due to sustainable reasons.

The study, "Die Energiewende in Deutschland: Stand der Dinge 2023" (The Energy Transition in Germany: Status 2023), released by Agora Energiewende on Thursday, reveals that German greenhouse gas emissions have reached their lowest level in 70 years, totaling 673 million tons of CO2. This marks a 46% decrease compared to the reference year of 1990, significantly below the annual target set by the Climate Protection Act for 2023, which was 722 million tons of CO2.

Agora Energiewende attributes the substantial reduction of 73 million tons of CO2 in 2023 to two main factors. Firstly, coal-fired power generation in Germany reached its lowest level since the 1960s, resulting in savings of 44 million tons of CO2. Secondly, emissions from the industry also decreased significantly, primarily due to crisis- and recession-induced production declines in energy-intensive companies. While the overall economic output contracted by 0.3%, energy-intensive production saw an 11% decline in 2023, according to Agora Energiewende.

However, only around 15% of the CO2 savings in 2023 can be attributed to long-term measures, such as the expansion of renewable energy facilities, efficiency improvements, or the transition to lower-carbon or climate-friendly fuels. Agora Energiewende warns that roughly half of the reduction is due to short-term effects, such as crisis-related production declines and lower electricity consumption, suggesting that emissions could rise again quickly due to economic fluctuations or long-term shifts in industrial production abroad.

While the power sector significantly contributed to the emissions reduction, the building and transportation sectors saw nearly unchanged CO2 emissions last year, repeatedly failing to meet the set climate goals. With the lack of emission reductions in these areas, Germany is expected to miss its European-agreed climate targets under the Effort Sharing Regulation by 2024, according to Agora Energiewende. This would require Germany to purchase emission rights from other EU member states to avoid penalties.

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Simon Müller, Director of Agora Energiewende Deutschland, commented that 2023 showcased a dual-speed scenario in Germany's climate protection efforts. While the energy sector achieved a climatic success with a historic high in renewable energy, the reduction in industrial emissions did not reflect sustainable development. Müller emphasized that if emissions are merely shifted abroad due to the crisis-induced production decline, no real climate gains are achieved. He also noted that the building and transportation sectors lag behind in structural climate protection.

Agora Energiewende calls for an intensified momentum in the expansion of renewable energies in the coming years to permanently replace carbon-intensive power generation. The industry also requires a suitable framework for transitioning. In the building sector, the focus should be on consistently implementing the adopted measures in 2024, according to the Berlin-based think tank. Additionally, political decisions are needed in the transportation sector to facilitate the breakthrough of electromobility.

The emissions in the power sector have more than halved since 1990, with a 46% reduction to 177 million tons of CO2 in 2023. This reduction is mainly attributed to lower coal combustion, resulting in savings of 29 million tons of CO2 in lignite power plants and 15 million tons in hard coal power plants. Agora Energiewende points out three reasons for this: a significant decrease in electricity consumption by 3.9% compared to 2022 due to the fossil energy crisis, increased renewable electricity generation in Europe, leading to more imports by Germany, and a 5% increase in renewable generation.

The total emissions from the energy sector, including refineries and district heating, were 210 million tons of CO2, which is 46 million tons or 18% less than in 2022. The energy market has eased, and electricity and gas prices have dropped, although the price of natural gas remains higher than pre-crisis levels.

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Agora Energiewende anticipates a record 14.4 gigawatts of photovoltaic capacity added in 2023, surpassing the previous best year in 2012 by approximately 6.2 gigawatts. This high addition compensates for significantly fewer hours of sunlight in the past year. Photovoltaic installations produced 61 terawatt-hours of solar power, one terawatt-hour more than in 2022. The German government's target of 215 gigawatts of installed photovoltaic capacity by 2030 has been significantly exceeded with this addition.

Wind power benefited from favorable weather conditions, with a slight increase in capacity addition, although it remained well below the defined target path. Wind power, producing 138 terawatt-hours, remained the most significant source of electricity, generating more power than all coal-fired power plants in Germany combined. In 2023, renewable energies surpassed 50% of the total gross electricity consumption for the first time, as confirmed by Agora Energiewende.

The industrial sector saw a significant reduction of 12% in emissions compared to 2022, amounting to 20 million tons of CO2 based on preliminary energy consumption and production data. The sector exceeded its annual target of 173 million tons of CO2 with total emissions of 144 million tons of CO2, reaching the lowest level since recording in 1990. Agora Energiewende highlighted the impact of the fossil energy crisis and economic downturn on the CO2 emissions of the energy-intensive industry, especially due to rising prices in the European gas market.

On the other hand, emissions in the transportation and building sectors stagnated, significantly falling short of climate goals. Building emissions were 109 million tons of CO2, surpassing the legally stipulated maximum of 101 million tons of CO2. The emissions only decreased by 3 million tons of CO2 compared to 2022, mainly attributed to savings in household gas consumption and reduced heating demand due to milder temperatures. Agora Energiewende called for the consistent implementation of the new heating law to effectively reduce emissions in the building sector.

The transportation sector managed to reduce CO2 emissions by 2% in the past year, totaling 145 million tons of CO2, significantly exceeding the target of 133 million tons of CO2. However, the reduction compared to the reference year of 1990 was marginal, at only 11%. Agora Energiewende criticized the slow progress in achieving the goal of 15 million electric cars by 2030, as the share of new registrations for electric cars remained unchanged at around 20% in 2023. The think tank called for a comprehensive concept for the transportation sector, including adjustments to taxes, levies, and subsidies related to cars, securing the expansion of public transportation, and facilitating the local traffic transition through modern road traffic laws. 

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The transformation of Germany's energy system is incurring costs that pose enormous challenges for the government, businesses, and citizens. This is demonstrated by an analysis of relevant forecasts and studies conducted by the Handelsblatt Research Institute (HRI). The result: Germany needs 1.1 trillion euros to achieve the legally mandated goal of climate neutrality by 2045 in the energy sector. For comparison, this is 65 times more than the budget deficit that the coalition government debated for weeks at the end of the year. This sum will not be borne solely by the federal government; it will also have to be shouldered by companies, financial institutions, and citizens, according to the analysis. Most of the money must go towards the expansion of renewable energies, but the expansion of electricity storage and grids will also require substantial amounts.

In the industry, concerns are growing that the government is not doing enough. Many of these investments, especially in urgently needed gas power plants, do not seem financially viable for companies without government subsidies. The federal government had already announced a power plant strategy early last year but has yet to present anything. In other important projects, such as carbon capture and storage (CCS), the industry is awaiting a government strategy. Entrepreneurs lament this uncertainty. Nonetheless, they are already initiating projects, often in collaboration with foreign companies, because there are already regulations in place in other countries. C. Krapp, K. Stratmann, K. Witsch

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