Current energy transition policy costs up to 5.4 trillion euros

If the current energy policy is continued, annual private investment in the energy, industry, buildings and transport sectors would have to more than double – from an average of around 82 billion euros between 2020 and 2024 to at least 113 to 316 billion euros in 2035.

This is shown by the study commissioned by the German Chamber of Commerce and Industry (DIHK), in which the economic consulting firm Frontier Economics analysed the current course of energy policy and identified alternatives.

"The figures show that the energy transition cannot be achieved with the current policy", says DIHK President Peter Adrian. "The energy transition can only work with a strong economy." 

He points out that investments in the energy transition often do not generate a direct return. Therefore, these funds must first be generated elsewhere. "However, the burden on businesses and the population is reaching a level that jeopardises our economic location, our prosperity and thus also the acceptance of the energy transition."

By way of comparison, total private investment in Germany amounted to around 770 billion euro in 2024. According to the calculations in the study, this would have to increase by 15 to 41 percent in order to implement the energy transition.

High energy system costs burden companies

The energy transition will also cause energy system costs to rise sharply in the coming years. In addition to investments in domestic energy production and infrastructure, these include running costs, for example for the operation of grids and power plants, as well as expenditure on energy imports. Overall, the study estimates these costs at 4.8 to 5.4 trillion euros for the period from 2025 to 2049. Of this, 2.0 to 2.3 trillion euros is attributable to energy imports, 1.2 trillion euros to grid costs (investments and operating costs), 1.1 to 1.5 trillion euros to investments in energy generation, and around 500 billion euros to the operation of generation plants. 

"Excessive pressure to transform in the form of unrealistic targets leads to extremely high and rising costs, misallocations and inefficiencies", says Adrian. 

Study provides food for thought on more cost-efficient energy transition

The study by Frontier Economics makes specific proposals in this regard and outlines a fundamental change of course in energy policy in some areas. "The study provides important impetus. We need to have an open-minded discussion across society about what is possible", says Achim Dercks, Deputy Chief Executive of the German Chamber of Industry and Commerce (DIHK). 

The central instrument in the model proposed by the study is comprehensive CO₂ certificate trading. The target path is regularly adjusted to the development of an international peer group in order to achieve ambitious climate protection without creating disadvantages for Germany as a business location as a result of national solo efforts. 

In addition, the concept envisages comprehensively streamlining regulation, intensifying technological competition and continuing to use the existing energy infrastructure. The latter applies in particular to gas networks, which in future will be able to transport hydrogen and climate-neutral natural gas – decarbonised through carbon capture and storage (CCS). In addition, investments in certified climate protection projects abroad should also be eligible for credit in Germany.

The study concludes that this strategy could save between 530 billion and 910 billion euros by 2050. This corresponds to a reduction of approximately 11 to 17 percent of the estimated total costs of the energy transition. Further cost savings of 80 to 220 billion euros could be achieved by postponing the climate neutrality target by two years, for example. Overall, depending on the degree of international cooperation, the concept could potentially save well over 1 trillion euros by 2050.

Exploiting short-term cost reduction potential

"The study contains suggestions for a long-term reorientation of the energy transition. At the same time, we must also make practical use of the study's proposals in the short term", says Dercks. "From the DIHK's point of view, this includes comprehensive grid planning, phasing out renewable energy subsidies for already profitable plants, and a more efficient energy mix that also takes into account the use of biomethane, blue hydrogen or CCS-decarbonised natural gas, regardless of the technology used." In addition, it would be better to control the construction of new gas-fired power plants not through government subsidies, but through market-based incentives – such as a hedging obligation for electricity suppliers.

Small-scale regulation, complexity and bureaucratic processes also stand in the way of the energy transition and undermine acceptance: "The transformation is stalling among companies and consumers because they are burdened and increasingly overwhelmed by energy transition-related regulation and bureaucracy", explains the deputy CEO of the DIHK. "At EU level in particular, the Green Deal has led to a proliferation of bureaucracy that we urgently need to reduce." At national level, the DIHK believes that the Building Energy Act should be simplified and efficiency legislation streamlined. 

Dercks' appeal: "The federal government has important decisions to make on energy policy this year. One thing is clear: in order for the energy transition to be successful, it must become more flexible and simpler. We need an energy transition that is open to all technologies, reduces costs, creates space for innovation and takes economic performance seriously as a prerequisite for effective climate protection."

The full study "New Pathways for the Energy Transition ('Plan B')"  is available for download on the Frontier Economics website.