Deutschland 2030

Jun 09, 2023

The German Business Model of 2030

By building on its many strengths and addressing its current weaknesses, Germany is entering the decarbonized age at speed.

Wind turbines, including some from RWE's new Kaskasi offshore wind farm, are pictured during the opening of the RWE-Offshore-Windpark Kaskasi, north of Helgoland, Germany, March 23, 2023.
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Germany, like all other countries, is facing major changes. Stopping man-made climate change will require major efforts. The countries of the world have pledged to operate in a climate-neutral manner. Germany, as one of the world’s most advanced and largest industrialized nations, has a pioneering role to play here.

The good news is that Germany is well equipped for the road to climate neutrality. What’s more, the German business model is intact. The precise factors that have been the basis of our economic success up until now are also those needed to successfully embark on the transformation. These factors will continue to work in 2030: innovative strength, a well-trained workforce, close integration into the global economy, a high-performance infrastructure, a culture of social consensus.

What will change, however, are the technologies, the products, and production facilities, and especially the energy required for production. Germany has relatively high energy costs by international standards. The United States is promoting transformation in its own country with the Inflation Reduction Act. The competition to transform is in full swing. Germany, with its business model, will hold its own in this competition. In short: The German economy will be greener and more digital in 2030, but just as successful.

A Country of Innovations

Germany is good at innovation—and will remain so. For five years in a row, Germany has spent more than 3 percent of its gross domestic product on research and development. In terms of the number of patent applications filed with the European Patent Office, Germany ranked second in 2022; in the United Nations’ new innovation index, Germany moved up from 10th to 8th place.

This innovative capacity made it possible for the first safe and effective COVID-19 vaccine to be developed in this country, for new efficiency world records to be set for solar cells, for German cars to be conceived that will soon drive themselves from A to B while parents play travel games with their children, and much more. With our innovative strength, German companies can deliver the products and machines the world needs to become climate neutral.

Germany’s innovative strength will remain a success factor in the 2030 business model. There are many concrete investment examples to show that I am not the only one who sees it this way. Tesla came to Brandenburg, Infineon is coming to Dresden, Northvolt is coming to Heide, Apple is doubling its investment in chip design in Munich, Wolfspeed and ZF are coming to Saarland. Innovative products are developed and produced in Germany by well-trained specialists. The dual training system has been imitated many times, but never successfully.

However, demographic developments are placing a burden on Germany as a business location. In order to maintain and strengthen the success factor of skilled workers in the German business model, the German government has fundamentally reformed immigration law. The aim of the reform is to make it much easier in future for skilled workers from abroad to take up employment in Germany. Anyone who wants to lend a hand is welcome to do so.

Strongly Integrated into the Global Economy

The German business model is also successful because our companies and supply chains are strongly integrated into the global economy. Germany is the world’s third largest exporter, after China and the United States. German products enjoy great popularity. This is also because German industry is characterized by strong medium-sized companies, the so-called Mittelstand. Our hidden champions are often highly specialized world market leaders for highly technologized products.

The success of the German business model is also due to our high-performance infrastructure. As an export and transit country with a central location in Europe, Germany will continue to have a good infrastructure in the future. The German government will focus on expanding rail transport and maintaining and upgrading roads. Added to this is the expansion of the digital infrastructure. Nationwide availability of fiber-optic networks is becoming increasingly important for the economy. That is why the German government is resolutely strengthening infrastructure as a success factor—with a great deal of money and commitment.

Another success factor of the German business model is the culture of consensus among the key economic policy players. The tax and contribution-free inflation compensation premium developed by means of “Concerted Action” (“Konzertierte Aktion,” which brings employer organizations, trade unions, and the government together) is a case in point. Employers and unions collaborated on the design of the measure and then implemented it on a large scale. For millions of workers, the premium helps them cope with the burdens of high inflation. Sometimes it takes longer to reach consensus because it requires time, commitment, and patience. But our consensus culture makes the German economy resilient, because it is only through this that the majority of German society supports important decisions and, as a result, social justice and social peace grow.

Building on Strengths, Addressing Weaknesses

So, we are building on our strengths. These include our innovative strength, our well-trained specialists, our export strength, our infrastructure, and our culture of consensus. And we are systematically addressing weaknesses. From industry’s point of view, these include, in particular, high energy costs. The most important relief here will come from expanding renewable energies as quickly as possible. In the 2030 business model, German industry will produce with climate-neutral production facilities using renewable energies and hydrogen. Decarbonization is the central element of the transformation.

The unspeakable Russian war of aggression on Ukraine has once again underscored the urgency of this task. The German government successfully averted the energy crisis that came with the war, thereby demonstrating two things at the same time: First, the German government proved that it can carry out both short-term crisis management and long-term transformation; second, it became clear that fundamental decisions could be made and implemented at great speed.

The concept of “Deutschland 2030” implies that this model must already be in place in seven years. There is no question that this will happen. The management of the energy crisis has demonstrated the speed at which Germany can function. LNG terminals were built and commissioned in record time, energy imports from Russia were swiftly replaced by other suppliers, a defensive shield using gas and electricity price brakes was put in place in just a few weeks. The result: Energy supplies have been secured, companies have stable energy prices, and inflation is also falling again. Germany can be quick when it needs to be. This also applies to the transformative elements of the “Business Model 2030.”

Less than halfway through its first term, the government has turbocharged the process of decarbonization. To ensure that Germany is fast enough in this endurance sprint to 2030, the German government is paying particular attention to accelerating planning and approval procedures. The first thing we did was to look at the framework for faster expansion of offshore wind, onshore wind, and photovoltaics. The expansion of renewable energies has priority over other legal interests. If there are proceedings, there are earlier first court dates.

Two percent of the state's land area must be designated for the construction of wind turbines. Species protection assessments have been accelerated and standardized nationwide; compensation payments will be bundled in the future to create contiguous, ecologically valuable compensation areas. Approval periods for land use plans have been shortened. Regional planning and planning approval procedures have been better integrated. Also, a personnel and further training offensive was launched in the planning administration.

Rapid Transformation

The framework for a rapid transformation of the energy system has been set. By 2030, we are expected to have a gross electricity consumption of up to 750 terra-watt hours (TWh). Of this, 80 percent must be generated from renewable energies. To this end, the expansion targets for electricity from solar and wind power have been raised significantly. Specifically, by 2030 we want to install 200 giga-watt of photovoltaic generation capacity, 115 giga-watt of onshore wind, and 30 giga-watt of offshore wind.

To achieve this, we have also adjusted the tenders for renewable energies and thus created attractive funding conditions. Grid expansion is progressing in leaps and bounds. There are currently around 13,679 kilometers of power lines in a total of 119 statutory procedures. For hydrogen, the expansion target has been almost doubled to 10 giga-watt compared with the previous target for electrolysers. Meter-high stacks of files for applications for wind turbines, power grids, and industrial plants will become a thing of the past as application and approval procedures are increasingly digitized.

In parallel with the transformation of the energy system, the German government is working with industry to drive forward the decarbonization of industry. With emissions trading, we are creating market-based incentives in the European Union for investments in climate-friendly production facilities. And with the EU’s Carbon Border Adjustment Mechanism, we are working on a system for an international level playing field. With the open and cooperative Climate Club, the German government has created an intergovernmental forum under the German G7 presidency of 2022 to promote green lead markets and global trade in climate-neutral goods. The growing number of club members shows that the decarbonization of industry is well on its way, and not only in Germany.

The German Business Model 2030 will therefore combine tradition and modernity: We will maintain and expand the traditional strengths and comparative advantages of the German economy. At the same time, we will create a modern and climate-neutral capital stock for the economy of the future. Let's look forward to 2030!

Jörg Kukies is State Secretary at the German chancellery and acts as economic and European policy advisor to Chancellor Olaf Scholz.