Can we really afford expensive investments in climate protection? Or will this put jobs and the economy at risk? According to Prof. Dr Barbara Praetorius, the question itself is erroneous. Because, according to the economist and political scientist, a sound overall calculation also includes those costs that are incurred if one does not (!) invest in climate protection. In an interview, the academic explains why she deems the shift towards a green economy indispensable. Prof. Dr Praetorius has been researching environmental, sustainability, climate and energy economics for many years. She was a co-chair of the federal government’s so-called Coal Commission between 2018 and 2019.

Prof. Dr Praetorius: Until relatively recently, that was the conventional narrative, because people focused solely on the costs of climate protection. However, views on this subject are now changing.  Today, the economic community is increasingly perceiving the risks associated with climate change and the secondary costs of unchecked pollution and resource scarcity as a threat. “Extreme weather” was most recently ranked number one in the “Global Risk Report 2021” published by the Davos World Economic Forum. And it cannot be denied that our current era, in which resources such as important waterways can no longer be used due to extreme drought, is already witnessing considerable economic consequences. The topic is on the economic agenda, and everyone is aware that climate protection and the economy must join forces. The question is no longer “if”, but “how”!

The British economist Sir Nicholas Herbert Stern, who advises the British government, explained in the so-called Stern Report from 2006 that climate protection costs only about one fifth of what we would have to bear in the form of secondary costs if climate change continues unchecked. It follows that climate change is what is actually costing us money. This financial dimension looks similar in Germany: if one takes as an indicator for climate protection costs the investment volumes anticipated, for instance, by the Federation of German Industries e.V. (BDI) for a successful energy transition, and compares these with the secondary costs of climate change, estimated by the German Environment Agency at 195 EUR per tonne of carbon dioxide, then the ratio here is also around 1:5.

We can, indeed must, invest in climate protection, but that does not mean that we have to forego prosperity and growth entirely. Because “green” technologies create new markets – the export business for these types of innovative plants and technologies is already developing far more dynamically than is the case in other sectors. The reason for this development is that the demand for carbon-neutral energy generation, energy efficiency and its associated services is growing worldwide. And of course, at the same time, one must approach the topic of growth very carefully, as green technologies also consume resources and are thus climate-relevant. But it’s certainly possible to manage the economy in a different way.

We need to establish a new economic model. The German Environment Agency calls it a “green economy”, while other concepts refer to a “doughnut economy”, i.e. an economy within planetary boundaries that allows everyone to live well. Further ideas include the post-growth economy and the economy for the common good. Whatever alternative we choose, our future economic management must be in harmony with nature and the environment.

Absolutely. Although embargoes and protests were not unheard of in the past, even the energy-intensive industries know that things cannot go on as before. For example, they have been working on projects and processes to make steel production carbon-neutral for some time now. Time is even shorter in this instance, because companies are in competition with each other. The earlier you can offer innovative technologies, the better for Germany as a business location and its position on the world market.

A range of different measures is desirable. If the costs are passed on, as is currently the case, for example, through emissions trading or the price of carbon, then consumers will notice that climate protection pays off. One can absorb external costs in this way, but another idea would be to require public-sector procurement to purchase sustainable products and support companies in converting production processes. Legislation is also essential, because it’s highly unlikely that these shifts will occur by themselves. We need changes in building standards and regulations, i.e. new standards for a circular economy. We also have to treat our waste differently. All this must also be considered from the outset – including for devices such as electric cars and batteries.  

Personally, I don’t believe this will be enough. Because the way we do business as a whole needs to change fundamentally. We need to value consumption differently. It is a long road, but we must take it. We have no alternative but to make the transformation to a green economy, because we need to protect our livelihoods.