Report

September 20, 2021

Action Plan for Climate and Foreign Policy

How Germany Can Become a Climate Leader

Germany has to become a climate leader. That is not optional, but a legal obligation – as the Federal Constitutional Court made clear in its ruling on April 29, 2021. The court not only warned of the need to adhere to the principle of intergenerational equity in the climate change law on which it was ruling, but also emphasized that Germany, as a leading industrialized nation, made a commitment when it signed the Paris Agreement to make a greater contribution to climate action than emerging economies and developing countries.

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This Action Plan is an edited and slightly updated translation of the German text that was originally published on September 20, 2021, as part of the DGAP Report Smarte Souveränität (“Smart Sovereignty”). It was written in the framework of the project “Ideenwerkstatt Deutsche Außenpolitik,” which is funded by Stiftung Mercator.

Please note that the PDF version of this text – including the infographics also shown below – is currently only available in German. An English PDF with English infographics will follow as soon as possible.

Recommendations

1. Taking Climate Priorities into Account in All Decisions
2. Boosting Climate Finance and Development Assistance
3. Refocusing Development Banks
4. Shaping a Green Recovery
5. Standing Up for EU Climate Policy
6. Establishing a Task Force on Adaptation Metrics
7. Improving Science Funding
8. Disclosing Climate Data

 

Article 3 of the Paris Agreement stipulates that the successive climate targets set at national level by each signatory must represent a progression over time. This national contribution must also reflect the highest possible ambition for the country, expressing its common but differentiated responsibilities and respective capabilities. Germany is a highly developed country with a considerable degree of historical responsibility for climate change and a strong interest in an economic and technological leadership role. Its obligation under the Paris Agreement is to play its part in ensuring that the world successfully makes a just transition to a carbon-neutral economy by showing leadership. During Federal Chancellor Angela Merkel’s term of office, Germany has already wasted a lot of time and room for maneuver with its inadequate Climate Change Act: years in which emissions could have been lowered and German businesses could have prepared for new rules. This mistake must not be repeated. But even setting aside international agreements, there are good reasons why Germany must take foreign policy action.

What is at Stake for Germany

First, Germany’s economy depends on its export and trade relations across the world, which are changing in the face of a changing climate and the global energy transition (see also the Action Plan for the Economy and Foreign Policy). It is extremely important to Germany, as a major exporting nation, that foreign and global climate standards take into account the interests of German exporters. The EU is currently a trailblazer in some respects when it comes to the development of climate policy measures that affect foreign policy (for example, the proposed carbon border adjustment mechanism and emissions trading for international shipping). Germany must endeavor to explain the reasons for such measures to third countries and seek to ensure that they do not result in diplomatic clashes or retaliatory trade measures. However, these measures do not yet go far enough to achieve the aims of the Paris Agreement. Germany must develop and implement more ambitious measures. Alternatively, such measures will be developed by others, e.g., the UK with its strong finance sector, to standards not automatically best for Germany’s different economic strengths.

The global energy transition means that Germany will face new geopolitical relations, competitions, and rivalries, which it will have to manage

The second reason why Germany must take foreign policy action is the geopolitical aspect. The global energy transition is fraught with geopolitical risks. When renewable energy replaces fossil fuels – and the question is when, not if – oil and gas exporters will lose out and fossil infrastructure will largely turn into stranded assets. Other countries can benefit from this (see also the Action Plan for the Economy and Foreign Policy) by exporting green electricity, for example, or raw materials such as rare earth metals, which are important for renewable energy technologies. The global energy transition means that Germany will face new geopolitical relations, competitions, and rivalries, which it will have to manage.

Thirdly, and on the forefront of current public debate, climate policy is also about the safety of the German public: The deadly floods in July 2021 made clear that Germany is not even adequately prepared for today’s extreme weather events. The report published by the Intergovernmental Panel on Climate Change (IPCC) in August has once again highlighted that intense rainfall events and other weather extremes will continue to become more frequent in the coming years as a result of climate change and will thus become a growing threat. The report also dispelled any doubts about the fact that this rise in extreme weather can largely be halted if the world reduces its carbon dioxide emissions to net zero. As Germany’s carbon dioxide emissions account for two percent of global emissions – as opponents of climate action never tire of pointing out in an attempt to evade responsibility (never mind that Germany makes up just one percent of the global population) – it is essential for German foreign policy to support emission reductions abroad. Germany not only has a moral duty to minimize climate damage abroad; it also has a pragmatic interest in doing so because climate damage always hits the most vulnerable in every society hardest, increasing inequalities and thus contributing to conflicts in Germany’s direct neighborhood and globally (see also the Action Plan for Climate and Security).

Finally, Germany also has a strategic interest in helping to shape the transition from fossil fuels to a climate-neutral economy in the countries of the Global South, and the adaptation of these countries to the impacts of climate change. This is not only important for security policy reasons (see also the Action Plan for Climate and Security), but also due to Germany’s economic interests, given that China is investing heavily in Sub-Saharan Africa and Southeast Asia.

It has been established that the world aims to reach net zero by the middle of this century. The only question is whether Germany will help to define the rules and standards of global trade and energy policy – or whether it will have to implement decisions taken by others. The latter entails considerable risks for the German economy, including with regard to planning reliability, long-term financing, and market access. Elections in 2021 offer Germany opportunities to take on a leadership role.

More Ambitions at Home

If it is to become a climate leader, Germany must openly and transparently set out the trade-offs between more future-proof economic activity and short-term profits. The same applies to trade-offs between domestic and foreign policy objectives, such as that between German export policy and fair market access for developing countries and emerging economies, which would help to avoid or at least reduce international conflicts. Compromises ought to be made in both of these areas, in the spirit of international and economic responsibility. This means raising ambitions at home: a more rapid phase-out of coal, oil, and gas, and other kinds of decisive action, such as construction regulations designed to achieve climate neutrality in buildings, a fundamental shift in transport policy, and reform in additional sectors, such as the financial industry and the agricultural sector.

Climate is a dimension that must be taken into account in all aspects of Germany's foreign relations

The slow phase-out of coal hangs like a millstone around the necks of German climate diplomats. Yet Germany could solve this problem relatively easily. Although coal is supposed to be phased out by 2038 at the latest, almost all experts believe that this process will already be complete in 2030. The most recent German and EU climate targets have all but guaranteed this. In spite of this, Chancellor Angela Merkel’s government rejects any changes to the coal phase-out decision, not providing credible plans to end fossil fuel subsidies more generally and even very publicly continuing to destroy villages and ecosystems to dig up coal. This is undermining German diplomats’ efforts to achieve global progress in the field of climate policy. For example, if the G20 countries try to persuade China, Russia, and India to phase out coal by 2030, Germany can contribute little to the debate. This will remain the case for as long as this wealthy country, which sees itself as a climate trailblazer, itself plans to end coal burning at a later date. Speeding up the phase-out of coal is vital not just for Germany’s credibility, but also from an economic policy and geopolitical perspective. These two areas cannot be fully separated from foreign policy.

 

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Progress on Development Policy and Climate Finance

International development policy, particularly climate finance, is another area that needs to be included more in foreign policy. Germany already plays a pivotal, highly respected role in international climate and development policy today through its long-term engagement in many countries in the Global South, for example via the Gesellschaft für internationale Zusammenarbeit (GIZ), Germany’s development agency, and Kreditanstalt für Wiederaufbau (KfW), the country’s development bank.

Germany should leverage this reputation to develop clear criteria for payments in the framework of the Green Climate Fund (GCF), the main financing instrument of the UN Framework Convention on Climate Change for the transfer of funds from the traditional industrialized countries to the Global South. At the same time, Germany should advance GCF’s long-term ambitions and financing. At the UN Climate Change Conference held in Copenhagen in 2009 (COP 15), the industrialized countries committed to “a goal of mobilizing jointly USD 100 billion dollars a year from 2020 onwards to address the needs of developing countries.” According to a report published by the UN Independent Expert Group on Climate Finance, however, they have failed to keep this promise. There are also criticisms of the methodology used by industrialized countries to calculate the funds provided.

Germany has so far failed to fully meet its obligations in the GCF framework. Likewise, the United States has emphasized the importance of climate finance but is not doing enough to turn its words into action. The same is true of the host of this year’s UN Climate Change Conference, the United Kingdom. Yet by failing to keep their own commitments, the industrialized countries lack credibility when they ask developing countries to make ambitious climate pledges (such as phasing out coal or eliminating subsidies for fossil fuels).

Recommendations

At the end of 2019, the Federal Foreign Office published a report on climate diplomacy that shows how almost every decision taken by German foreign policy makers has climate implications – from the financing of an expressway abroad to trade agreements or development assistance. Climate is a dimension that must be taken into account in all aspects of Germany’s foreign relations, both at the national level and in the framework of the European Union and the United Nations. The year 2021 is pivotal: many decisions are due to be taken on the development of standards in relation to climate finance and the disclosure of climate-related risks.

1.     Taking Climate Priorities into Account in All Decisions

In order to meet the climate targets established by the Paris Agreement and develop a climate-neutral economic and financial system while taking the other sustainable development goals into account, stakeholders in German foreign policy need to have sufficient expertise in climate science and policy and sustainable finances. This includes parliamentarians, the staff of all ministries at all levels, the employees of institutions such as KfW and GIZ, and the staff of partner organizations in Germany and abroad. The federal government should develop and implement a climate training program, as this is the only way to ensure that decisions will actually lead to the goal of climate neutrality.

The new federal government could shape a green recovery under German and transatlantic leadership

All political decisions should be examined in terms of their climate implications in order to ensure that Germany does not make huge investments that will become worthless in the near future because they depend on fossil fuels or are exposed to high climate risks. This final point is particularly relevant, as most organizations and governments currently treat climate as just one field of work among many others. As a result, many decisions are not scrutinized in terms of their compatibility with climate targets. Changing this, especially for the government ministries, should be a top priority for the next federal government.

This of course also applies to energy policy. The Nord Stream 2 decision, for example, would undoubtedly not be taken today. Now, however, it is important for the federal government to determine how Germany can permanently phase out natural gas use and what will then happen to the associated infrastructure in the long term as well as how to ensure the European electricity market is functioning without coal and gas-fired power stations to stabilize the load and prices. A sustainable finance system, which can only be established in a reliable political framework, is key. Germany is currently a long way from being a leader. The final stage of the COVID-19 pandemic offers the new federal government a rare opportunity for reform. It could shape a green recovery under German and transatlantic leadership in the coming electoral term.

An important step in climate mainstreaming is better integration of development policy and climate and foreign policy goals. Closer cooperation with the research and scientific community, especially including social science research, is also necessary in order to ensure that local stakeholders can identify with projects. This kind of long-term capacity building helps to develop resilience. The need to better assess projects’ sustainability is not the only reason why research is necessary. At present, there are also no guidelines that can be used to plan and prioritize adaptation measures and to compare international adaptation needs. This is problematic both within Germany itself and for climate finance worldwide. The result is that funds can easily be misused and that development policy lacks an important scientific basis.

2.     Boosting Climate Finance and Development Assistance 

development and climate adaptation in developing countries needs to rise. The current target of 0.7 percent of the federal budget is very low, and yet Germany still fell short in 2020, when the actual figure was 0.6 percent. Other countries, such as the United Kingdom, are also failing to meet their already low targets. This could be changed by awareness raising and more effective communication about how closely development, climate change, and security are intertwined. Investment in sustainable development policy helps to maintain and build peace around the world. An important first step would be for the new federal government to acknowledge this and include a commitment to significantly boost the development assistance budget in its coalition agreement. The funds for climate finance should also be topped up. At the G7 summit held in Cornwall in June 2021, Germany pledged to raise its contribution to climate finance from four billion to six billion euros per year by 2025 at the latest. The next federal government should flesh out this pledge in its coalition agreement.

It is difficult to overstate the importance of standards in the field of climate finance. The fact that a whole array of sometimes incompatible and opaque environment, social, and governance (ESG) criteria currently exists means that they can be misused for greenwashing on a grand scale. Germany must adopt a clear position on the harmonization of climate and financial standards. This is particularly relevant with regard to the EU taxonomy, which sets out which economic activities contribute the most to achieving the EU’s environmental objectives. The aim is to encourage investment in truly sustainable economic activities. This requires standards that are set based on clear metrics and not by industries that benefit from continuing to burn fossil fuels.

Germany should seek to ensure that climate change is adequately considered in all decisions taken by international financial institutions

Again, the year 2021 is pivotal as many decisions are due to be taken on the development of standards in relation to climate finance and the disclosure of climate-related risks. Under the presidency of the United Kingdom, COP26 has made this issue a priority. A framework for the disclosure of climate-related risks in companies has been created in the form of the Taskforce on Climate-related Financial Disclosures (TCFD). Germany should very rapidly determine how, and with what resources, the government and non-governmental stakeholders will participate in this platform. This should be defined in the coalition agreement.

Finally, the transfer of climate-friendly technologies should also be supported. Alongside progress in established networks and alliances – such as the United Nations Climate Technology Centre and Network (CTCN), WIPO Green, Mission Innovation, the International Solar Alliance, and others — new approaches are needed. This includes government purchases of licenses for key technologies so that they can be made freely available.

3.     Refocusing Development Banks 

Development banks and the International Monetary Fund (IMF) will play an important role in the transition to a more resilient, greener, and more nature-positive society, especially in the world’s poorest countries. Germany should seek to ensure that climate change is adequately considered in all decisions taken by international financial institutions such as the World Bank, regional banks, and the IMF, especially in the context of post-COVID economic stimulus packages. Resilience against climate risks must be made a priority in the implementation of these packages in order to ensure that the right lessons are learned from the coronavirus crisis.

Germany’s own development bank, KfW, is successful and respected around the world. It therefore offers an ideal starting point for developing and implementing strategies to integrate climate change into development finance. Germany has already gained experience in this, for example via GIZ projects, but learnings are currently not shared. Also, success metrics are not standardized and tested against risks of maladaptation.

Insurance is another priority in development finance today. However, financial assistance for poor countries in the wake of a catastrophe does not solve the main problem of their high level of vulnerability. In the countries of the Global South, support should be provided on – at least – equal terms for the prevention of humanitarian catastrophes caused by weather and climate extremes, and for resilience building. Scientific studies have repeatedly shown that adaptation measures are only successful if functioning governance structures are in place. The situation is similar with regard to equal rights for women: the greater the inequality between men and women, the lower the country’s capacity for climate adaptation. The new federal government should base its strategy on an interministerial approach that fosters the necessary intensification of adaptation financing, but at the same time supports initiatives created by the countries affected.

Standards for the disclosure of climate and transformation risks must be introduced for the work of KfW and other development banks. The same also applies to government climate finance; this is another area where the lack of standards makes it difficult to judge the sustainability of various projects. The federal government should task KfW with developing criteria that encourage real sustainable development and adaptation, and that result in projects being turned down if they do not comply with all sustainable development goals. These criteria can then be adopted by private-sector donors. This will enable KfW to contribute to developing the metrics set out above, but it will also make it easier to get private donors involved in meeting the considerable funding requirement for transformation. It is crucial to involve state-of-the art science – as, for example, provided via the IPCC – and scientists to ensure transparency and inclusivity as well as hedge against vested interests from industry (including the consultancy industry). Open data, scripts, and methodologies should be mandatory.

In the long term, there should be easily comparable ESG criteria that apply worldwide. The earlier this is achieved and the more influence Germany can exert on their design, the more Germany itself can benefit in political and economic terms.

4.    Shaping a Green Recovery 

Germany and Europe should ensure that all measures funded by the EU’s coronavirus recovery fund are required to be linked to sustainable development goals in order to avoid being locked into the fossil fuel economy in the long term. Emissions need to be prevented and adaptations encouraged at both national and international level. The aim must be a green recovery.

Germany should also abolish all fossil fuel subsidies as quickly as possible. In 2016, the G7 countries had already made a commitment to “the elimination of inefficient fossil fuel subsidies” by 2025, and they reiterated this pledge in Cornwall in 2021. Although Germany has made considerable progress on this – it ranks in first place among the G20 countries, according to the rankings published by ODI and the International Institute for Sustainable Development (IISD) – German subsidies are still above five billion euros annually and include subsidies for coal mining and processing. Germany should also seek to persuade its G20 partners to eliminate these subsidies, in part to avoid a situation in which German businesses are at a competitive disadvantage.

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5.     Standing Up for EU Climate Policy

Climate policy, as a collective good, requires joint action at EU level. Germany’s foreign policy representatives should support the EU’s climate regulations and initiatives – or at the very least refrain from undermining them. There are elements of German and European climate policy with which not all EU countries are satisfied. One example is the controversial EU proposal to establish a new emissions trading scheme for transport and buildings, the impetus for which came mainly from Germany. The Nord Stream 2 pipeline has also caused a great deal of irritation on the part of Germany’s EU partners.

The new federal government should play a leading role in climate diplomacy, but it should also be open to other approaches in the field of energy policy

Conversely, Germany has to put up with the energy policy of other EU member states, including Polish and Czech interest in building new nuclear power plants. Germany must also be prepared for compromise when it comes to the revision of EU regulations on climate action. This includes highly sensitive topics such as the TEN-E Regulation, which determines which infrastructure projects can be classified as “projects of common interest,” or the Sustainable Finance Taxonomy, which defines which types of investment can be considered sustainable. The new federal government should be ambitious and play a leading role, but it should also be open to other approaches in the field of energy policy. Negotiations in Brussels or at the national level, for example between Germany and Poland or between Germany and France, are just as much a part of climate diplomacy as an EU-US summit.

In the “Fit for 55” package published on July 14, 2021, the European Commission has made numerous climate proposals that have implications for foreign policy. The most important of these is the carbon border adjustment mechanism, under which imports of carbon-intensive products (such as steel or cement) will be made more expensive via carbon pricing. This is intended to prevent energy-intensive sectors from moving their production abroad when carbon costs rise within the EU. The representatives of the German federal government should strongly support this proposal, for example in the context of the World Trade Organization or the G20. They should make it clear to partners that Germany and the EU would ideally like to see the mechanism generate no revenues whatsoever, due to other countries increasing the cost of their domestic industries’ carbon dioxide emissions. The proposal amounts to a “climate club,” in which all countries price their carbon dioxide emissions with the aim of jointly achieving drastic reductions in carbon emissions globally.

6.     Establishing a Task Force on Adaptation Metrics

Alongside emission reductions, another key aim of climate policy is adaptation to unavoidable effects of climate change. However, while there are already relatively good metrics for greenhouse gas emissions, it remains difficult to assess the benefit of adaptation initiatives and to compare different adaptation measures internationally. Yet this is important so that criteria can be developed to measure whether GCF funds or development financing actually enhance adaptive capacity and do not have adverse long-term impacts (maladaptation).

Thanks to its world-leading research landscape, Germany has the chance to play a much bigger role internationally in the development of such standards. This could take place, for example, via international partnerships and initiatives that aim to integrate the different approaches to adaptation metrics that currently exist and to establish standards on the basis of the relevant scientific and social science findings.

Although the absence of clear global standards and evidence-based targets is undoubtedly not the only reason for a lack of ambition, it is nonetheless an obstacle to progress on damage limitation and adaptation. It is impossible to provide convincing evidence of where and how resources should best be used.

Germany’s initiative on international cooperation in climate research would strengthen Germany's role globally and improve scientific expertise at home

A first step toward rectifying this would be a broader initiative spearheaded by Germany. Germany’s leading role in scientific bodies such as the IPCC and the country’s importance in international climate negotiations could be leveraged to develop adaptation metrics in a process modelled on the emissions task force. This would be an important first step, one which would not require the investment of much political or economic capital. This task force could be announced and set up in the coming electoral term.

7.     Improving Science Funding

The new federal government should rethink the current German practice of highly introspective national projects and press for cross-border science funding. Building on the experience of Horizon 2020 and other EU programs, this could result in more flexible alternatives to European science funding. Unlike the EU programs, which specify the subject of the research in great detail, they should facilitate open calls for proposals on important overarching topics. With far less bureaucratic red tape, researchers from Germany and around the world could then, depending on their field of expertise, work with various ministries on specific practical problems, such as metrics to assess climate damage. This kind of collaboration would also strengthen Germany’s global role and enhance domestic scientific expertise. Finally, it would strengthen scientific capacities in the Global South too. The IPCC report published in August demonstrated once again that there are still serious gaps in the world’s knowledge about the effects of climate change in the Global South.

8.     Disclosing Climate Data

An important prerequisite for evidence-based standards and regulation is up-to-date data on building stocks, vulnerability in the broadest sense, and climate and weather data at local level. Open data is also a requirement for the development of comprehensive metrics for adaptation strategies and for climate change loss and damage. Germany, which discloses all weather data, could play a pivotal role in supporting initiatives for the publication of such information, especially data about weather and about the damage caused by extreme weather and climate changes. For financial reasons, not all European countries share their weather data with the public and the scientific community. This makes it more difficult to assess climate risks, not just for these countries but for Europe as a whole. The situation is even more difficult outside Europe. In much of the world, no data is kept on heat-related deaths, for example, even though achieving genuine resilience is extremely difficult without this data. Tying project financing to the disclosure of data is a first step in accelerating the trend toward open and transparent data in the medium and long term.

Bibliographic data

This Action Plan is an edited and slightly updated translation of the German text that was originally published on September 20, 2021, as part of DGAP Report No. 17 Smarte Souveränität (“Smart Sovereignty”). It was written in the framework of the project “Ideenwerkstatt Deutsche Außenpolitik” about which you can find more information here.

Please note that the PDF version of this text – including the infographics also shown below – is currently only available in German. An English PDF with English infographics will follow as soon as possible.

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