Climate policy of new Merkel Government: Three steps forward – four back

With the coalition agreement for a new German government under Angela Merkel, a major opportunity to realign German climate policy to the challenges of the Paris Climate Change Agreement has passed. The new coalition no longer aims to reach the German 2020 climate target in time. With this announcement, Germany officially steps down as an international climate champion and undermines the Paris agreement as a whole. The coalition agreement fails to provide new ideas for tackling greenhouse gas emissions in industry and buildings, and proposed measures in transport are insufficient to initiate the necessary transition. These backwards steps will not be offset by the positive developments in the coalition agreement which include an agreement to pass a climate protection law, an agreement to set a date for coal phase out and the faster expansion of renewable energy. Therefore, German climate policy is not compatible with the Paris Climate Change Agreement.

(This blog is a translation of a blog in German, which contains revised extracts from a blog published in German in January 2018.)

In the coalition agreement between the CDU/CSU and the SPD for a new Merkel government, German policy – and climate policy – is pre-determined for the next four years. On climate policy, the future government takes three steps forward, but also four back, and as a whole is not compatible with the global goals of the Paris Climate Change Agreement, which was made possible in the first place partly by Germany’s outstanding role in international climate diplomacy.

Three steps forward:

Increasing the renewable electricity target: The generation of electricity from renewable energy in Germany has been a success story. In 2017, 38% of the electricity came from solar, wind, hydro and biomass; more than ever before. This is a remarkable achievement. However, the outgoing government reduced the support for renewable electricity. The central legislation, the Renewable Energy Act, was weakened and a cap on the expansion of renewables was introduced, thus slowing down the transformation.

The new coalition agreement will increase the previous target for the share of renewables in the electricity mix in 2030 from 50% to 65%. Compared to previous actions, this is a step in the right direction, but still not enough to be truly compatible with the Paris Agreement. This would require electricity supply to be 100% renewable by 2030-2040, given the agreed phase out of nuclear energy and no activities on carbon capture and storage. Achieving a 100% renewable electricity sector any later than this would only be compatible with the Paris Agreement objectives if the removal of CO2 from the atmosphere is developed in parallel. However, these technologies are not yet mature and their availability uncertain and would need to be supported today to be available at large scale when needed. This is not the case in Germany: the technology is very controversial and does not feature in the coalition agreement.

Setting a date for coal phase out during 2018: The Paris Agreement foresees a complete phasing out of greenhouse gas emissions, and in particular a phase out of coal, the type of electricity generation with the highest CO2 emissions per kWh. Setting a date in the course of 2018 for phasing out coal, as foreseen in the coalition contract, is an essential step for successful climate policy, but this is long overdue. It remains to be seen which date will be chosen. 2025 to 2030 would be compatible with the Paris Agreement, but no later unless measures to pursue the removal of CO2 from the atmosphere are implemented in parallel.

Despite the success of renewables, coal continues to account for a high share in the electricity mix, with 40%; higher than the EU or world average. The electricity sector accounts for 40% of German emissions. The EU emissions trading scheme should make coal power unprofitable, but the price signal is too weak, partly because too many certificates were issued. As the penetration of renewable energy increases, gas power plants, which emit only half as much CO2 per kWh but are more expensive to operate than coal-fired power plants, are forced out of the market. Coal power in Germany is so cheap that Germany even exports 8% of its electricity production, and thus has also pushed gas power plants in Austria and the Netherlands out of the market. Electricity exports are currently much higher than at the beginning of the decade.

Simply shutting down the 20 oldest coal-fired power plants by 2020 (slightly earlier than planned) would close the gap to meet the German 2020 climate target by more than half (50 million tonnes of CO2). Several studies estimate that the security of supply in this scenario is not endangered despite the phase-out of nuclear power. Phasing out coal can be compensated by reducing exports and reviving underutilised gas-fired power plants, even in the case of additional adverse conditions (such as lack of sun and wind).

Climate Protection Act in 2019: With a climate protection law that, according to the coalition agreement, should be passed in 2019, Germany would finally create a legally binding framework. Such a law would explicitly enshrine comprehensive climate protection in German legislation. Germany has implemented individual measures and goals but has always failed to cast them into a law that cannot be easily undone by succeeding governments.

But also, four steps back:

Turning away from reaching the 2020 climate target in time: The coalition parties expressly declare their support for “the 2020, 2030 and 2050 climate targets agreed at the national and European level, and in the framework of the Paris Climate Change Agreement for all sectors” (literal translation). But they want to “close the action gap to reach the 2020 climate goal as soon as possible”. This text is more subtle compared to the outcome of the exploratory talks that preceded the coalition agreement. Still, it can be interpreted as an admission that this gap will not be closed in 2020, but later.

If Germany actually abandons the climate target for 2020, this would have unforeseeable consequences for the international process surrounding the Paris Agreement. The international process is based on mutual trust that countries comply with their voluntary commitments. If a country like Germany, whose outstanding role in international climate diplomacy made the Paris Agreement possible, does not meet its long-established goal, who will? The credibility as one of the leading countries in climate protection would be forsaken and the ambitious efforts of the German climate negotiators would be torpedoed. How will Germany persuade other countries in the future to stick to their goals and take them seriously? And how can Germany bring along the EU, which should submit a new, more ambitious target by 2020 under the Paris Agreement. Instead, it is to be feared that other governments will drop their goals at the last minute with reference to the German “frontrunner”. The possible damage to the climate can therefore be significantly greater than the coalition wants to admit.

The goal of reducing greenhouse gas emissions by 40% between 1990 and 2020, originally stemming from the coalition agreement of 2002 between social democrats (SPD) and the greens, has since been confirmed by all following coalitions. Germany has had 16 years to prepare for its implementation.

With the exceptions of the promotion of renewable energies in the electricity sector and the promotion of low-energy housing through low interest loans, the German governments have failed for a long time to implement effective climate protection measures. As a result, German greenhouse gas emissions have not fallen further in this decade, but are stagnating at a consistently high level. Since 2009, greenhouse gas emissions have been stable at around 900 million tonnes of CO2 equivalent per year. In 2017, emissions were only 28% below 1990 levels, and in 2020 it will be 33%, according to forecasts by the Federal Environmental Agency. This leaves a significant gap of about 90 million tonnes of CO2 equivalent per year – or roughly 10% of today’s annual emissions to the 2020 target. Recent unpublished reports even speak of a gap of 100 million tonnes due to the lack of positive developments in recent years.

Transport measures will not be enough: The coalition agreement provides for a number of measures to promote electric cars. For example, cities will be given the possibility to require the use of electric vehicles for taxis and car sharing programmes, charging infrastructure is to be improved, tax credits for electric company cars and faster depreciation for commercial electric vehicles are expected to drive demand.

But one crucial point is missing: the coalition agreement does not include any time horizon for the end of the internal combustion engine, as currently discussed in India (2030), France (2040), the Netherlands (2030) and Norway (2025). Norway already reached up to a 50% share of electric cars for new registrations. In addition, if cars are going to soon consume significantly more electricity, the expansion of renewable energy should also be faster.

The lack of action in the transport sector led to an 8% increase in greenhouse gas emissions from the sector  between 2010 and 2016. The sector still accounts for 18% of total national emissions. While the EU has the world’s most ambitious CO2 emissions standards for new cars, the outgoing government has reportedly lobbied the EU in the internal negotiations for lower standards.

Some existing measures even continue to push in the wrong direction. In Germany, tax credits for company cars continue; company cars account for more than half of new vehicle registrations, with a high proportion of large Sport Utility Vehicles (SUVs) in the past. Trucks still have an economic advantage over railways for freight due to low highway tolls and support for super long trucks; the proportion of greener means of transport, such as inland navigation and railways, are stagnating or losing their share of the road. The diesel scandal has been mismanaged. Individual cities may be able to impose diesel driving bans to meet EU air pollution limits, thereby compensating for the national government’s lack of action.

The “climate chancellor” Merkel has not only prevented more ambitious measures in the transport sector within the EU and Germany, but has also been reported to have pressured the Chinese government to weaken its quota for electric vehicles. With this backward-looking policy, German car manufacturers may miss out the opportunity to become a major player in the emerging global EV market and jobs in the future will be endangered rather than secured.

Important steps to fill the gap would be the removal or adjustment of environmentally harmful subsidies for company cars and an increase of the road toll for trucks.

No new ideas for emissions from industry: Industrial emissions have been stable since 2010, accounting for 20% of German emissions. The main instrument for reducing emissions should actually be the EU emissions trading scheme, which is largely ineffective due to the low CO2 price. Energy-intensive industries enjoy numerous tax advantages, which among other things result in households being disproportionately burdened.

The coalition agreement contains the general declaration of intent to strengthen the EU Emissions Trading Scheme but without identifying measures on how this should be implemented. Instead, an effective cross-sectoral CO2 pricing system is made conditional on “being global if possible, but in any case, encompassing the G20 countries” (literal translation). This leaves a big door open: fulfilling this condition is highly unlikely, as some G20 states, such as Saudi Arabia or Russia, are far from putting in place any climate policy.

A uniform cross-sectoral CO2 price is demanded by the Government’s own expert council as a central element of future climate protection policy, and in the meantime also has support from unexpected sides, for example, the chairman of the board of the energy company E.ON, Johannes Teyssen. Such a cross-sectoral CO2 price would prepare the industry for the future challenges at an early stage and thus strengthen its competitiveness. What keeps the “climate frontrunner” Germany from joining an ambitious coalition of the willing and in this way to define the G20 as a goal, but not as a condition? Instead, the statement in the coalition contract also rejects support for French President Emmanuel Macron’s call for a cross-sectoral carbon tax.

Germany would have to directly campaign for more ambitious targets in EU emissions trading and immediately introduce a minimum price for CO2 allowances, such as in the UK, to make the emissions trading system more effective. Also, the tax breaks of the energy-intensive industries would have to be put to the test, of course considering the competitiveness of German industry.

No concept for buildings: The coalition agreement proposes new tax breaks for building renovation, but the scale and potential impact are unclear. Although the energy consumption of new buildings is quite low due to building standards, old buildings are renovated too slowly and to an insufficient degree. To date, action in this area has been promoted with low interest loans, which can, however, not be fully effective, given the generally low level of interest rates. It is unclear how the proposed tax benefits will be structured and how they will work. Countries such as Norway and France are making much faster progress with the renovation of buildings.

Although clear energy savings can be recorded for certain household appliances, these are due to the standards set at EU level. In principle, these could turn out to be much more ambitious.

Germany has now officially stepped down from its role as an international climate champion. Dropping the aim to reach the 2020 climate target in time undermines Germany’s integrity in this area and thus the basis of international climate policy, as enshrined in the Paris Agreement. Despite the positive steps of pursuing the adoption of a climate law, setting a deadline for coal phase out and the faster deployment of renewable energy, the proposed package is not compatible with the global objective of the Paris Agreement to limit climate change to well below 2°C and make efforts not to exceed 1.5°C.



Niklas Höhne,, +49 173 715 2279