00:00German industry is facing unprecedented challenges
00:04and the longest period of economic malaise in the modern republic's 75-year history.
00:09With even established giants like Volkswagen in dire straits,
00:13companies need to go greener, become more innovative.
00:16There are companies who have set extremely ambitious targets
00:20and are now realizing that this is harder than they thought.
00:24Might climate protection pose a threat to the German economy?
00:27And is it actually affordable?
00:33Some major corporations have reduced their emissions.
00:36Energy company RWE, Mercedes-Benz, industrial conglomerate Siemens
00:41and cement manufacturer Heidelberg Materials.
00:45Staying with RWE, the energy supplier wants to phase out coal-fired power generation over the next five years.
00:52In the course of its transition to renewables through 2030, the company will be investing 55 billion euros.
00:59Together with compensatory measures, the plan is to further cut emissions and by 2040 hit the target of net zero.
01:07We're coming out of a few years in which climate protection has been one of the key topics in global media.
01:16In almost every boardroom conversation we know this was one of the three top priorities.
01:23Industry consultant Jens Borchardt is very familiar with their corporations and their green strategies.
01:29Have those conversations borne any concrete results?
01:32Very many companies have set targets and because that has been the case,
01:37it has become something that companies competed on in their respective sectors
01:43and no one wanted to be substantially less ambitious than their major competitors were.
01:49If you pollute a lot, you also have to reduce a lot.
01:52RWE has made progress but remains the second biggest CO2 emitter in Germany.
01:58We'll get to the top polluter shortly, as well as further examples of positive news in the green transition.
02:05First, let's take a look at the German economy, which has been in recession for two years straight.
02:10And the signs for 2025 are not good.
02:13There are at least three main reasons for this unparalleled situation.
02:17First, China. German car sales there are down and Chinese electric vehicles are relatively cheap.
02:25So now the likes of BYD are currently conquering European markets.
02:30Second, wage levels. VW, for example, pays above average wages, making its products more expensive.
02:37The company has plans to close factories and slash 35,000 jobs.
02:41Third, high energy costs.
02:44In Germany, one megawatt hour of electricity costs carmakers 190 euros.
02:50Compare that with 132 euros in Spain, 89 in China and just 69 euros in the US.
02:59The price of energy might go up or down from one day to the next, but the general pattern of disparity is clear.
03:06Three industries produce particularly high amounts of CO2 and now have to invest in green technologies.
03:12Cement, chemicals and steel.
03:15Cement is a serious polluter, currently the biggest by carbon emissions in Germany.
03:20Its production generates a lot of CO2 while consuming enormous quantities of energy.
03:26Globally, cement makers emit more greenhouse gases than even the aviation industry.
03:33Heidelberg Materials is among the world's top five cement suppliers and has ambitious plans for the future.
03:40Becoming carbon neutral by 2050.
03:43In recent years, producers have been under growing pressure on this front from investment funds.
03:49The CEO of Heidelberg Materials has himself pointed to potential investors demanding a green commitment.
03:57Many want to see innovative, future-oriented technologies as opposed to fossil fuels.
04:09Sabine Nalinger heads a foundation bringing together almost 30 major companies to promote market-based and sustainable solutions.
04:26There is no money left in the financial market if you invest in fossil fuels.
04:30Companies have no chance of actually investing in hydrogen, green electricity and converting their production.
04:40Next up, the chemicals industry.
04:43BASF has invested in a demonstration plant for electric steam cracking.
04:48Steam cracking is essential for the production of light plastics and cosmetics.
04:53By using electricity from renewable energy sources, the new technology has the potential to cut CO2 emissions from steam cracking by 90%.
05:02The world's largest chemicals producer has made a big commitment to its green transition between now and 2028, totalling 2.4 billion euros.
05:12It's unusual for companies to publish such specific figures due to widespread reluctance to make solid commitments.
05:20I assume that you don't like to publish such figures so that the competitors can see how stringent the strategy is and how large the financial volumes are.
05:32Of course, this often has a background.
05:35And then I think it's hard to calculate what exactly you count as a green transformation.
05:42Plenty of companies want to move away from outdated production methods, including in the steel sector.
05:48ThyssenKrupp is another big CO2 emitter.
05:51Instead of environmentally harmful coal, Germany's biggest steel producer plans to fuel its plants with green hydrogen.
05:59But financial help is at hand for transitioning production with a range of subsidies and grants available in Germany.
06:06ThyssenKrupp has negotiated a total of at least 2 billion euros, while also profiting from a new tool, a climate protection agreement with the German government.
06:16Example, a steel beam costs 100 euros, rising by a further 25 due to production with green technology.
06:24The government covers the difference in order to keep its companies competitive.
06:30There is substantial interest in industry.
06:32The money pledged is performance-related, i.e. dependent on the required emissions reductions being made.
06:38But are companies taking those goals seriously enough?
06:44German companies are actually among the most sensitive, especially to environmental goals.
06:51They have, in general, moved relatively rapidly compared to other countries to try to understand what it means to succeed in a business, to create profit and returns for shareholders.
07:12Maurizio Zollo is a professor of strategy and sustainability in London.
07:18Companies have set themselves binding climate targets.
07:21Some of this is, of course, down to greenwashing, where PR supersedes genuine progress.
07:28But many companies are taking concrete action.
07:32There are many companies who have quite a significant reputation to maintain.
07:38It's quite a big step for companies to take back targets that they have set.
07:42Right now, they still try to achieve both economic success and bring down emissions.
07:49Some corporations have even increased their CO2 emissions, such as Adidas, drugmaker Merck, financial services firm Deutsche Börse, as well as DHL and electricity provider E.ON.
08:00Critical voices say not enough companies are committed for the Paris Climate Agreement goals to be reached.
08:06German airline Lufthansa plans to be climate neutral by 2050, which means phasing out kerosene.
08:14Synthetic aircraft fuel is a green alternative.
08:17SAF accounts for 0.3 percent of global jet fuel, while one billion liters of kerosene are burned in aircraft engines every day, 12,000 liters per second.
08:28A real solution has yet to be seen anywhere in the commercial aviation industry, including Lufthansa.
08:35Meanwhile, there's the lack of zero-emissions aircraft.
08:39In a setback, Airbus recently abandoned plans to launch the world's first hydrogen-powered commercial airliner.
08:48Then there is Mercedes.
08:50The CEO wants to continue making combustion engine cars well into the next decade, effectively postponing the target for making the brand all-electric.
08:59German carmakers have been accused of lacking credibility and publishing vague climate strategies.
09:05What is certain is that companies are under pressure from the state to innovate.
09:10The goals that were set up at the Paris Agreement in 2015 were all signed by governments.
09:20And they have committed to deliver their targets by 2030 and then eventually to 2050.
09:29Germany has pledged to go climate neutral by 2045.
09:32The European Union's target is not quite as ambitious, setting a date of 2050.
09:38Either way, the challenge ahead is deep and above all pricey.
09:42That German climate commitment primarily means German industry, with its small and medium-sized businesses as well as big corporations having to make the target a reality.
09:53From the total cake of investments, maybe a maximum of 20% comes from the state.
09:59The remaining 80% must come from the private sector.
10:03And the state now has to make smart moves to mobilize the 80% from the private sector.
10:10Do investments in climate protection pay off in the long term?
10:15Committing a higher proportion of GDP globally would generate a dividend of up to 5 euros for every year.
10:21Also due to the subsequent reduction in costly environmental damage.
10:26Another new finding, at companies where executives do not receive bonuses for going greener, the transition progresses more slowly and climate targets are less likely to be achieved.
10:38DHL, for example, has actually increased its CO2 emissions recently with no significant climate-related bonuses for board members.
10:46Whereas at RWE they make up 13% of executives' pay as the transition is making significant progress.
10:54So does climate protection pose a threat to the German economy?
10:59Companies have to pay for every ton of carbon they produce and those costs are rising.
11:05The climate crisis means they have to transition, even if that's a very difficult move for some.
11:11And where is the clean power going to come from and the urgently needed green hydrogen?
11:17Can industry overcome these daunting challenges?
11:20Tell us what you think in the comments.
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