Greenhouse Gas Neutral Germany: Effects on the Economy and Living Conditions in Rural Areas

Background and Objective

The intended transformation towards greenhouse gas neutrality influences living conditions and the economy in rural areas in various ways. The necessary interventions stand to affect real estate prices, settlement structures, infrastructure provision, income opportunities, and the cost of living. Businesses are confronted with the task of adapting to new technologies and retaining their competitiveness. Simultaneously, the transformation towards greenhouse gas neutrality can also present opportunities for new economic activities. Depending on existing spatial, social, and economic conditions, regions stand to adapt differently to upcoming changes and will henceforth require different forms of policy support. This also raises the question of how policy instruments can contribute towards achieving the climate goals.

The TREND:LR Project has investigated the effects of the changes towards greenhouse neutrality in three sub-projects:

• Sub-project A has focused on the effects on living conditions
• Sub-project B has analysed the effects on the economy
• Sub-project C has researched the climate policy integration in local and regional development processes
  

Approach

Sub-project A began with a literature review in order to identify key transformative processes and to estimate their effects on rural areas. On this basis, different future scenarios has been developed with the goal of assessing the influence of various policy approaches and the likelyhood of different development paths.

Sub-project B, we first systematised the factors and potential impact channels which are likely to be particularly relevant for the (regional) economic impacts of the transformation. Building on this, we established and investigated the sectors and regions where significant developments are to be expected.

Sub-project C first examined to what extend and under which conditions climate protection is involved in local and regional development processes. We focued on LEADER and village renewal. This formed the basis for new proposals to increase of climate policy integration in rural development.

Data and Methods

At their outset, all sub-projects evaluated the relevant scientific literature and political strategies. Following this, sub-project A formulated different development paths by drawing on the scenario technique and the Delphi-method. This process was complemented by three expert workshops.

Sub-project B analysed secondary data on economic structures, energy intensity, and interdependencies between regions and sectors. Statistical methods were used to compare possible effects of the transition to greenhouse gas neutrality on the economy of different German regions.

Subproject C conducted six case studies on enabling and impeding factors concerning climate policy integration based on desk research and semi-structured interviews with local experts.

Our Research Questions

• Which policy approaches are most spatially sustainable with regard to living conditions, which compensation measures may be necessary and how can relevant actors’ and citizens’ acceptance and willingness to cooperate be furthered?
• What are the effects on the economy? To what extent will economic changes affect all regions in a similar manner? Does the transformation to greenhouse gas neutrality have a spatially differentiated effect?
• To what extend and under which conditions is climate protection integrated in local and regional development processes?

Results

Subproject A examined the effects of climate protection policy in the areas of settlement development, mobility, buildings, and energy on living conditions (i.e., housing, income, infrastructure, environment) in rural areas. The aim was to analyze the influence of various policy approaches, identify possible causal mechanisms, and estimate the probability of different development paths. The results show that the state of research on the effects of climate protection policy on living conditions in rural areas is largely inconclusive and incomplete. Three scenarios were used to explore different focal points of climate protection policy. An important finding is that there is potential to improve living conditions in rural areas in the long term through climate policy, for example by improving living comfort, access to services, or income. It therefore appears possible in principle to balance negative effects in other areas with measures that have positive effects.

Subproject B aimed to better understand the potential impacts of the transition to greenhouse gas neutrality on the rural economy. The evaluations showed that the greatest impact of the transition to GHG neutrality on the rural economy is likely to result from the decarbonization of road freight transport. Employment in material-intensive companies is heavily dependent on transport costs, and material-intensive companies tend to be located in rural areas. Since the decarbonization of heat generation involves the use of hydrogen, the distance to the hydrogen network will also play an important role in the competitiveness of companies. The current structure of the energy market means that green policies tend to affect all areas in a similar way, but changes in the structure could alter this at any time.

Subproject C investigated the extent to which climate protection is incorporated into regional and local development processes and which factors are decisive in this regard. The focus was on LEADER and village development planning as bottom-up rural development measures. The aim was to develop recommendations for policy and funding practice in order to promote the integration of climate protection. The six cases studied show that the integration of climate protection depends on the interplay of various factors. In addition to funding regulations, socio-economic conditions can play just as much a role as the constellation of actors on the ground. In principle, mandatory requirements are at odds with the bottom-up approach. It is therefore crucial to preserve local scope for action while at the same time strengthening opportunities for climate protection integration.