Future Mobility: The Key Component of Germany’s COVID-19 Recovery Program

The German government agreed to a 130-billion-Euro stimulus plan to resurrect its virus-damaged economy. One of the central targets is the transportation industry. Germany implements its reaction and recovery program to strengthen the transformation in the transportation sectors by providing incentives for green mobility solutions.


The main transportation points are:

  • Incentives for purchasing and creating environmentally friendly vehicles, particularly electric cars
  • Promoting public transportation
  • Modernization of the fleet for cleaner buses and trucks
  • Highlighting the significance of Power to X and green hydrogen
  • Encourage eco-friendly investment in the aviation sector.
  • Reduction in the value-added tax (VAT) on all goods and services, including transportation

Incentives for eco-friendly vehicles

Given that the nation has one of the largest automotive industries in the world, many experts and NGOs were worried that subsidies would also be given to vehicles with internal combustion engines.

The recently announced initiatives, however, almost exclusively support electric and low-emission vehicles:

  • The annual motor vehicle levy for passenger vehicles will more clearly reflect CO2 emissions. Tax rates will rise for cars above 95 g/km.
  • Germany will increase the subsidy from 3.000 to 6.000 Euros for purchasing electric cars up to 40.000 Euros under the term “Innovation Bonus.”
  • A bonus program for 2020 and 2021 that promotes future investments by vehicle makers and the supply industry will be funded with an additional EUR 2 billion.
  • To encourage electric mobility in urban transportation and to assist non-profit organizations in converting their fleets, a “Social & Mobile” fleet exchange scheme with a 2020–2021 time frame is being established for social services. Two hundred million euros are needed for the measure.
  • The interim fleet exchange program for artisans and small and medium-sized businesses for electric cars up to 7.5 t will soon be implemented.
  • An additional 2.5 billion euros will develop modern, secure charging infrastructure, encourage electromobility research and development, and manufacture battery cells.

Shipping and Aviation

Although challenging to decarbonize, shipping and aviation are severely impacted by the situation. The following sectors will receive a total investment of 2 billion euros in new technologies: 1 billion euros will be spent bolstering, modernizing, and digitizing shipping as a green mode of transportation.


The importance of hydrogen in a post-fossil economy was emphasized throughout the program. The promotion of green hydrogen should cost a total of 7 billion euros. Tax breaks are available for electrolysis that generates green hydrogen and for using it in heavy-duty vehicles and aircraft.

The RED II will be implemented with greater ambition than the EU mandates.

Additionally, up to 2 billion euros are made available for European cooperation to develop economies that export hydrogen.

Setting up the foundation for a green recovery

Germany’s stimulus program is primarily concerned with addressing the crisis’s effects on the economy and laying the groundwork for a recovery. Avoidance or reduction of external environmental consequences was not the driver of the measures. However, the majority of tools will support an economy capable of getting back on track and is already headed on the right path towards a future devoid of fossil fuels. Long-term financing of all these policies and subsidies will undoubtedly come from more significant taxes. To assure sustainability incentives from this other side of fiscal policymaking, it will be crucial to deploy clever taxation tools.

Author : Swastika Jha

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