Study: Making German Housing Climate Friendly to Cost €1.4 Trillion

Making Germany’s residential housing stock climate friendly by 2050 will cost €1.4 trillion ($1.64 billion), according to a study released on Tuesday.

In the four largest European economies – Germany, France, Italy and Spain – investments totalling around €3 trillion will be required by 2050, according to a joint study by the insurance group Allianz and the credit insurer Allianz Trade.

“Decarbonizing the real estate sector is a very tough challenge that needs to be tackled,” said Arne Holzhausen of Allianz Research. The sooner that is done, the better, he said.

Residential buildings in Germany account for around 14% of carbon dioxide (CO2) emissions in the country, excluding indirect emissions, according to the study. This makes the sector a significant contributor to greenhouse gas emissions and an important area to address to achieve climate neutrality.

Germany’s Building Energy Act was introduced for this purpose, as it mandating that every newly installed heating system be powered at least 65% by renewable energy. However, home owners have complained about the high costs of complying with the law.

The current governing coalition between conservatives and Social Democrats has said that it intends to abolish the act, but since it remains unclear what it would be replaced with, the legislation is likely to remain in place.

Climate-friendly renovations would increase property prices by about 0.5 percentage points, the study said. Nevertheless, it would be worthwhile.

“In Germany alone, value creation in the real estate sector could be €1 trillion higher by 2050, creating around 107,000 new jobs,” Holzhausen said. This could reduce the unemployment rate by an average of 0.2 percentage points.