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Financing the transition to greenhouse gas neutrality: Is the German banking system prepared?

Author

Listed:
  • Baccianti, Claudio
  • Baltzer, Markus
  • Boesel, Nils
  • Finck, David
  • Hagemann, Tim
  • Kuntz, Laura-Chloé
  • van der Meyden, Friso
  • Schlam, Carina
  • Schober, Dominik
  • Unger, Robert

Abstract

Achieving Germany's goal of greenhouse gas neutrality by 2045 requires a shift to non-fossil energy sources and low-carbon production and consumption patterns. This transformation necessitates substantial investments. According to existing evidence, estimates of additional investment needs - beyond replacement investments - range between 2% and 4% of GDP per annum. This study explores the capacities of the German banking system to finance these additional investment requirements. We conclude that the German banking sector's, given solid excess capital and assuming frictionless credit allocation between banks, is capable of financing these additional investments even under conservative assumptions. However, the results of firm and household surveys conducted by the Bundesbank show that in both groups, a majority is reluctant to decarbonize and undertake the necessary investments in the coming years.

Suggested Citation

  • Baccianti, Claudio & Baltzer, Markus & Boesel, Nils & Finck, David & Hagemann, Tim & Kuntz, Laura-Chloé & van der Meyden, Friso & Schlam, Carina & Schober, Dominik & Unger, Robert, 2026. "Financing the transition to greenhouse gas neutrality: Is the German banking system prepared?," Technical Papers 01/2026, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:342511
    DOI: 10.71734/TP-2026-1
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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