Digital systems of relevance to environmental technology and resource efficiency

Digitalization is increasingly evolving into an enabler of system formation, as the four keys to digitalization (digital data, automation, digital customer interfaces and connectivity) lay the foundation for innovative digital systems. At the same time, new products and services are being developed alongside innovative ways to use existing components. One thing the digital systems presented on the following pages have in common is considerable environmental relief potential. Environmental relief potential is understood to mean the extent to which using, applying or drawing on a product, process or service eases the burden on the environment. For example, renewable energies essentially possess substantial environmental relief potential with regard to climate action and energy consumption.  

 

Specifically, the sections that follow address five digital systems: connected energy, connected information networks, Industry 4.0, urban connected mobility and smart grids. The exact content of each of these digital systems is defined, and a description of both incumbent and new companies and business models is followed by an assessment of economic and ecological aspects.  

 

Effects and potential of digitalization in the green tech industry 

The economic potential of digitlization

Environmental technology and resource efficiency are already a fast-growing market. Digitalization can further accelerate expansion in this sector: The synergies and system effects arising from the expansion of digital systems will probably lead to stronger demand for environmental technology and resource efficiency products, methods and services. Current calculations forecast that digitalization will add more than 20 billion euros to Germany’s green tech industry in 2025 – three percent of the total market volume forecast for the same year. The individual lead markets will, however, make varied contributions to this potential (see Figure). Digitalization will add the least growth in the lead markets for sustainable water management and material efficiency.

Energy efficiency, the biggest of the six lead markets, should see the strongest impact on its absolute volume, with digitalization adding 7.2 billion euros in 2025. Digitalization also harbors substantial growth potential of 4.2 billion euros in the lead market for environmentally friendly power generation, storage and distribution. The lead market for sustainable water management is predicted to reap the smallest volume increase of only 0.8 billion euros from digitalization in 2025, a figure that also equates to the smallest proportional market growth of just 1.9 percent. The focal point of this lead market is on infrastructure whose long service life means it will only be penetrated slowly by digital developments. The sections that follow draw on technology lines and the keys to digitalization to analyze and explain the drivers in the individual lead markets.

Volume that digitalization can add to the lead markets for environmental technology and resource efficiency in Germany in 2025 (billion euros)

Ecological potential of digitalization

Environmental technology and resource efficiency inherently contain significant potential to ease the burden on the environment and protect environmental goods. Economic growth in this industry therefore also leads to positive ecological effects, including both the potential and actual environmental relief achieved by using a product, process or service. Digitalization will amplify these ecological effects. This section examines the effects on the climate realized by saving energy and material on the basis of the equivalent carbon dioxide (CO2e) saved. CO2e includes emissions of all gases of relevance to the environment, taking due account of their respective warming potential.

Calculation of the CO2e emissions resulting from the generation of electricity, for example, also makes provision for upstream and downstream process chains (the construction and operation of power plants, the  production, treatment and transportation of fuel etc.). Digitalization is having an impact on climate action, but also on other environmental goods such as air, water, soil, biodiversity, countryside and noise. Examples are presented in our discussion of the individual lead markets. The scope of environmental relief potential in the environmental technology and resource efficiency industry and its individual lead markets varies – as does the pace of development – even in conventional development forecasts (i.e. those that do not yet include the added effects of digitalization). In the course of the green transformation and in the green economy, non-digital solutions tool help ease the burden on the environment. Environmental relief potential is expected to grow in the lead markets for environmentally power generation, storage and distribution, sustainable mobility, waste management and recycling, and sustainable water management in the years from 2015 through 2025. By contrast, environmental relief potential in the lead markets for energy efficiency and material efficiency (excluding digitalization) is expected to decrease in the same period – sharply, in some cases.

Only with digitalization can further environmental relief potential be actively tapped across all the lead markets. Why? Because digitalization enhances the relief potential that is already forecast without digitalization. In the six lead markets, digitalization is expected to generate extra environmental relief potential of 50 million tonnes of CO2e in 2025. That equates to a 5 percent reduction in total German CO2e emissions relative to 2014 due to the effects of digitalization alone.

Additional CO2 savings (in millions of tonnes) through digitalization in the individual lead markets in Germany in 2025