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| Fig. 1: Breakdown of electricity generation sources in the BRD created by author using tables compiled by AGEB . [14] This figure has two y-axes; the left axis shows electricity generated in GWh, and the right axis shows the BRD's Gross Domestic Product (GDP) as a percentage of reunified Germany's GDP in 2020, compiled from the Germany's Federal Bank. [15] (Image Source: L. Garcia) |
Since the industrial revolution, there has been a very strong correlation between energy consumption and economic growth. [1-3] Policymakers around the globe in developing and developed countries have made decisions regarding energy production with the understanding that energy consumption is coupled to economic growth. Germany, the world's fourth largest economy, is a striking exception to this trend. [4] Germany began cutting its electricity consumption in 2005, but has maintained healthy economic growth, measured in GDP (see Fig. 2).
After the end of World War II, Germany was split into two by the occupying Allied powers. For the next 40 years, the East and West halves of Germany were governed by two diverging economic and political systems. [5] The Western half of Germany (the BRD) began rethinking its relationship between electricity consumption and growth after the energy crisis in the 1970s, and this process continued after unification. The Eastern half (the DDR) underperformed economically relative to the West, and its approach to policymaking did not hold much sway after reunification. This report highlights how the BRD, and reunified Germany were able to chart a different path regarding electricity usage while achieving sustained economic growth, a process that has taken over 50 years.
Central Europe is coal-rich, but hydrocarbon poor. [6] The BRD heavily relied on energy imports, particularly of hydrocarbons from the Middle East to meet its energy needs. [6] When the 1973 OPEC Oil Embargo caused oil prices to spike, this caused a complete shift in energy policy across the West that persists to the present. The United States increased its military involvement in the Middle East, France went on a nuclear reactor building spree, and the UK ramped up its exploration of hydrocarbons in the North Sea. [7-9] Germany's other half, the DDR, did not recalibrate its energy policy as the bulk of power was generated using domestically-mined brown coal. [10] The BRD, however, was in for a reckoning. Since most of the BRDs energy came from imports, the oil price spike caused an economic crisis that lawmakers struggled to address. Like the United States, the BRD increased its diplomatic involvement in the Middle East, but stopped short of military engagement. Instead, the BRD sought to strengthen its hydrocarbon supply chain by investing heavily in Vereinigte Elektrizitts und Bergwerks (VEBA) and Ruhrgas, aspiring oil giants, to explore petroleum resources in the Middle East and elsewhere. Through diplomatic wrangling and heavy investment, VEBA was able to begin petroleum infrastructure projects in the late 1970s on a large scale from Saudi Arabia to Siberia. [6] However, VEBA was unable to follow through with these projects in a cost-effective manner, forcing the BRD to collaborate with foreign oil giants like Shell and BP to import and refine crude oil.
The BRD began economically engaging with the DDR and the Soviet Bloc in the late 1960s leading up to the oil crisis, and invested heavily in infrastructure to import natural gas. This collaboration accelerated following the 1973 Oil Crisis, with the first pipeline from the USSR to the BRD border with Czechoslovakia being completed the same year as the oil crisis by the Soviets and Ruhrgas, funded by loans from Deutsche Bank. [6] This relationship continued through unification, with several more pipelines, most notably Nord Stream delivering gas directly to Germany. In Germany gas is largely used for heating and cooking, as opposed to electricity generation. [11,12] This is why Figs. 1 and 2, which show electricity generation, do not fully capture the BRD's or Germany's dependance on natural gas.
The 1973 Oil Crisis and price spike also paved the way for the expansion of nuclear energy in the BRD. The advent of heat-power cogeneration allowed for heat generated from nuclear fission to be used to synthesize gas or liquid from coal. [1] This made the deployment of nuclear power incredibly popular with the powerful coal union that pressured the BRD's governing coalition into adding nuclear power to the energy mix. The expansion of nuclear power is clearly shown throughout the 1980s and 1990s in Fig. 1.
In addition to attempting to secure and diversify its energy supply chains, the BRD also took steps to reduce its energy consumption. Since transport fuel was particularly impacted by the price shock, the BRD declared that there would be car-free Sundays to limit fuel consumption. [6] The BRD also proposed an energy pricing scheme to deter consumption during the first several years of the oil shock. [1,6] These reforms began a vigorous debate about the relationship between energy consumption and economic growth.
During this crisis, the BRD became steadily more efficient at increasing its economic output compared to its energy consumption than its western peers, such as France and Britain, which both experienced backsliding in energy intensity (measured in amount of GDP generated / Joule of energy consumed). [1,6] Although there were increases in efficiency, GDP growth was still closely tied to energy. This is shown in years 1973-1975 in Fig. 1, where GDP growth contracted as electricity consumption fell. There are also a wide array of economic indicators that one could use to define economic growth which are not necessarily tied to GDP. However, the coupling paradigm that ties economic growth to energy uses GDP as a metric, so this report does as well.
The government of the BRD moved to embrace energy efficiency amidst pressure from an active environmental movement that eventually became a mainstream political party in several governing coalitions. This movement strongly believed that it was possible to continue economic growth while reducing environmental impacts. There was also a flurry of research during the late 1970s and early 1980s sponsored by the BRD that concluded that decoupling could be possible if the government continued with its energy pricing scheme. [1,6]
As the environmentalist movement in the BRD developed into a mainstream political party called the Green Party in the 1970s, it forcefully advocated for the immediate elimination of nuclear power from the energy mix. The Green Party entered several governing coalitions in the BRD where it was able to achieve modest victories against nuclear power, but as Figs. 1 and 2 show, there weren't wholesale reductions in nuclear power generation until well after unification. The Greens were key to drawing up the initial plans for the Energiewende, or Energy Transition during the late 1990s. Naturally, their plan included phasing out all of Germany's nuclear reactors. Subsequent governing coalitions that carried out Energiewende followed these plans, and accelerated following the Fukushima disaster in 2011. [13] Fig. 2 shows that the process of phasing out nuclear reactors is almost complete as of 2023.
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| Fig. 2: Breakdown of electricity generation sources in Germany created by author using tables compiled by AGEB. [16] This figure has two y-axes; the left axis shows electricity generated in GWh, and the right axis shows Germany's GDP as a percentage of its GDP in 2020, compiled from the Germany's Federal Bank. [15] (Image Source: L. Garcia) |
Economists have vigorously debated whether or not any form of decoupling of economic growth from energy usage is possible for the past several decades. Many have come to a consensus in the past decade that weak decoupling is possible with improvements in efficiency, but it is not possible to achieve strong decoupling on a global scale.
A widely-cited paper on the subject defines absolute, or strong, decoupling as the continued reduction of environmental impacts while sustaining economic growth, and relative (weak) decoupling as higher rates of economic growth than rates of growth in material and energy consumption and environmental impact. [2] Although Ward et al. and several papers they referenced concluded that absolute decoupling of GDP growth from energy usage was implausible, they did reference Germany as an encouraging sign for the possibility of absolute decoupling. [3] Since Ward et al. was written in 2016, Germany has accelerated cuts to electricity production and largely maintained the rate of its GDP growth, as shown in Fig. 2. [2] Fig. 2 shows that Germany has been able to achieve consistent GDP growth while cutting its electricity consumption since 2005. Over the past several years, Germany's economy has been recovering from the 2020 Coronavirus Pandemic and subsequent supply chain issues. Germany's GDP growth from 2020-2024 mirrors the period following the 2008 financial crisis, after which the economy maintained its upward growth independent of electricity input. The overall trend in GDP over the past two decades has been sustained growth, accompanied by a steady decline in electricity consumption. Since this simultaneous economic growth and reduction in electricity consumption have continued for almost two decades, Germany could be described as having achieved absolute decoupling depending on the terms arbitrary definition. It remains to be seen if Germany's GDP growth and electricity consumption decline continue at their upward climb during a decade that has already been defined by turbulence and uncertainty. Growth could stagnate, this trend could reverse, and Germany would have to reconsider its approach to energy. Ward and others have not agreed on a particular time frame to define what constitutes absolute decoupling, but if trends continue at their current pace through the next decade or accelerate, it would be difficult to argue that Germany has not achieved this economic miracle.
© León Garcia. The author warrants that the work is the author's own, and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
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[10] H. Weber, Die DDR 1945-1990 (Oldenbourg Wissenschaftsverlag GmbH, 2012).
[11] O. Ruhnau et al., "Natural Gas Savings in Germany During the 2022 Energy Crisis," Nat. Energy 8, 621 (2023).
[12] J. Cyrys et al., "Sources and Concentrations of Indoor Nitrogen Dioxide in Hamburg (West Germany) and Erfurt (East Germany)," Sci. Total Environ. 250, 51 (2000).
[13] J. Dempsey and J. Ewing, "Germany, in Reversal, Will Close Nuclear Plants by 2022," New York Times, 30 May 11.
[14] "Auswertungstabellen zur Energiebilanz für die Bundesrepublik Deutschland 1990 bis 2007," Arbeitsgemeinschaft Energiebilanzen e.V., September 2008.
[15] "Lange Zeitreihen Zur Wirtschfentwicklujg in Deutschland," Deutsche Bundesbank, October 2024.
[16] "Auswertungstabellen zur Energiebilanz Deutschland: Daten für die Jahre von 1990 bis 2023," Arbeitsgemeinschaft Energiebilanzen e.V, 2023.