Experts warn Germany's debt could rise without more climate action

Germany could face far higher public debt by 2050 than previously expected without additional investment to tackle climate change, according to a study.

By the middle of the century, Germany's debt-to-gross domestic product (GDP) ratio could be 52 percentage points higher than estimates based on the European Commission's official forecasts, the New Economics Foundation said in a report.

Across the European Union, the experts expect public debt ratios to be 58 percentage points higher on average by 2050 unless climate risks are addressed.

The report says this is because the real economic costs of climate change are not factored into official debt projections.

As the climate crisis damages productivity, infrastructure and key sectors such as agriculture, transport and energy, gross domestic product (GDP) and tax revenues are expected to decline, the authors wrote.

At the same time, the costs of repairing damage and rebuilding after climate-related disasters are likely to rise. Taken together, these factors are expected to push debt levels higher, the report said.

Greater spending on measures to tackle climate change could limit the increase in public debt in the coming decades, according to the experts.

If Germany were to spend an additional 1% of its GDP each year on such measures alongside adaptation efforts, public debt in 2050 would be only 22 percentage points higher, the researchers calculated.

Sebastian Mang of the New Economics Foundation said some argue that Europe does not have the money to invest in tackling the climate crisis, but the study shows the opposite: Europe cannot afford not to prioritize climate investment.