CLIMATE | WORKING PAPERS
Transformative Investment as the Driver of a New Economic Boom?
by Tom Krebs
PUBLISHED8. JANUARY 2024
This study examines the growth effects of public investment in the socio-ecological transformation of the economy and society. The analysis shows that a drastic expansion of public climate and social investments in Germany can trigger an economic boom and at the same time support the transformation towards climate neutrality. In a positive scenario, annual growth rates of up to three per cent can be expected over the longer term. In this sense, a green economic miracle is possible. However, this positive scenario will only become a reality if the public sector dramatically increases climate and social investments – by around two per cent of GDP on a sustained basis. A negative scenario, in which the German economy barely grows for several years, is also possible. Such a stagnation scenario is highly likely if the German government sticks to its current fiscal policy, thereby preventing a growth-enhancing investment drive.