Germany’s politicians and industry need a ‘totally new way’ of collaborating to go green: BASF’s CEO

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Wind turbines operated by RWE AG during sunset in Rheinisches Revier, Germany, on Wednesday, Aug. 11, 2021.
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Politicians in Germany need to work with industry leaders if the country wants to succeed in reducing its carbon emissions, according to Martin Brudermüller, chief executive of BASF, one of the world’s largest chemical producers.

“If we want to succeed in the decarbonization plans of Germany, but also the EU, we have to come to a totally new way of collaborating between industry and politics,” he told CNBC’s Annette Weisbach on Wednesday.

“What we currently see is that politics is engaging in one ambition after the other: Can it be 10 years faster? 10% more reduction? So it’s a race about ambition,” he noted. “I ask myself sometimes, whether society and politics needs to [have] a real reality check. It is not lacking an ambition, but we have to engage now in the how … to really say, where do we want to be? What does it take to get there? That’s the effort where politics is not engaged.”

A federal election is fast-approaching in Germany with the vote set for Sept. 26, and there’s a high chance that Germany’s Green Party will be a part of a future coalition government. The Greens are currently seen with 17% of the vote, outgoing Chancellor Angela Merkel’s conservative alliance, the CDU/CSU, has 21% of the vote and the Social Democratic Party with 24%, according to Politico’s poll of polls.

The new German government, whichever form it takes, must engage with industry leaders, Brudermüller said, “to create positive regulation framework. It cannot be forbidding, restricting, not allowing anymore — it must be enabling. What do you really need to make this a success, and to stay competitive on this journey?”

While forming a coalition government could take weeks, it’s likely that the Greens, once a fringe party, will enter government and have a strong influence over energy policy, taxes and investment. Given the strong rise in popularity of the Greens this spring and summer, markets are prepared for the party to gain more power and prominence in government.

“It will take time for a new government to emerge, but when it does, we expect an administration more focused on combatting climate change, and one content to keep fiscal policy accommodative to promote economic recovery,” Dean Turner and Maximilian Kunkel from UBS Global Wealth Management said in a note Wednesday.

“We don’t expect much of a market reaction to the election. This is because coalition agreements can take weeks, sometimes months. Therefore, investors will not know the outcome for some time. But over the long term, green investment is set to soar,” they added.

The Green Party has an ambitious spending plan as a central party of its manifesto. It has outlined plans to spend 500 billion euros ($592 billion) on infrastructure and over the next 10 years on Germany’s climate transition. The party wants to restructure the country’s economic model into a “social-ecological system” and aims to accelerate the expansion of renewable energies and exit coal energy by 2030.  

It has also called for higher taxes on the wealthy and a relaxation of Germany’s so-called debt brake (which caps the government’s structural net borrowing) which would enable Germany to raise more money on public markets.

Experts expect green investment to rise dramatically in the long-term but there are some concerns among businesses, especially energy-intensive ones like BASF, that this will lead to a rise in taxes. As such, they are concerned that they could become less competitive as a result.

BASF is a multinational company, based in Germany, whose products range from chemicals and plastics to crop protection products.

Brudermüller told CNBC that the new government’s tax policies should be watched closely, and that government needed to help subsidize any transition. “We have to really look on how we see the overall package. I think what is important [is that] if companies should manage the transformation, you have also to ensure that they earn the money to invest.”

“I think if this is a societal demand that you go for the transformation, it is also a societal task to help you at the beginning of that journey to engage. So new innovative technologies, pilot plans, they have to be subsidized and funded … So it’s not only the taxes, it’s also the public funding. And this is this positive framework I’m talking about,” he said.

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