CLEW Guide – Germany still off track for 2030 climate targets

• As Europe’s largest economy, Germany is a key energy hub in the heart of the continent.
• Greenhouse gas emissions have decreased 40 percent since 1990 and Germany aims for climate neutrality by 2045.
• Germany’s world-renowned “Energiewende” – the country’s transition to climate neutral and nuclear-free energy supply – has broad public backing.
• After 16 years of conservatives-led governments under chancellor Angela Merkel, the three-party coalition of SPD, Greens and FDP from late 2021 has put a focus on climate-friendly transformation, setting the frame for urgently needed transition steps. With some delay, it presented a comprehensive Climate Action Programme 2023 to put the country on track to reaching its climate targets. However, months-long disputes also on key climate policy – such as the phase-out of new oil and gas heaters – have held up progress, and public discontent with the government and the rise of populist movements risks slowing climate efforts even more. Germany is set to miss its national climate targets in the future, which could also entail a costly EU target miss.
• Germany emerged from both the pandemic and the height of the energy crisis in better shape than many feared, as mild temperatures, savings and the successful yet costly search for alternatives to Russian energy sources prevented energy shortages, and the state supported businesses and citizens grappling with rising prices. The country remains well prepared for its second winter without Russian gas.
• The energy crisis caused the government to double down on renewables expansion and speed up the transition. Although there are positive signs in the expansion of renewable energy, electric cars, and heat pumps, general progress in the German energy transition is slow, according to a project tracker by Ariadne.

Major transition stories

• Same ambition level, significantly less money – the ruling coalition government has cut its special "Climate and Transformation Fund" by 45 billion euros by 2027 in response to a ruling from the constitutional court. The country's highest court declared that transferring 60 billion euros of unused pandemic borrowing to the special fund (set up to finance energy transition projects outside of the regular budget) was unconstitutional, throwing the government's budget plans into disarray. The coalition now plans to close the resulting 17-billion-euro budget gap for 2024 through cuts in a wide range of areas, while returning to a higher level of carbon pricing than initially planned and by tackling environmentally damaging subsidies. Germany will stick to its key target of delivering a climate neutral transformation of the economy, but "will have to use significantly less money" to meet this goal, chancellor Scholz said. A detailed list of the planned cuts has not been published yet.
• Climate foreign policy – Germany is seen as a credible leader in international climate talks despite shortcomings at home, and has hosted governments for the annual Petersberg Climate Dialogue for more than a decade. The government published a climate foreign policy strategy set to ensure all government ministries speak with one voice to international partners to foster a socially just and economically successful move to climate neutrality worldwide. The strategy accompanies the security policy strategy and a China strategy, both published in 2023.
• Just transition – What started out with a debate about supporting coal workers in mining regions and state subsidies for so-called “structural change” is increasingly turning into a cross-societal debate about leaving no one behind in the transition to climate neutrality. Installing a heat pump, buying an electric car or dealing with higher fuel costs due to CO2 pricing affects everyone, but low-income households will need more support to manage the changes. The energy crisis caused steep rise in "energy poverty" across Germany, with millions in the country in 2022 feeling financially unable to keep their homes adequately warm in 2022. A just transition will become a big issue not only in Germany, but across Europe, when the new EU emissions trading system for transport and buildings starts in 2027. The "climate bonus," which the government promised in its coalition agreement and which would return some of the revenue from Germany's carbon pricing to low-income citizens, is yet to be developed and delivered.
• Sustainable finance – In contrast to its reputation as an energy transition pioneer, Germany has been a latecomer in tapping into the potential of compelling banks, insurance companies, fund managers and other financial actors to curtail CO2-intensive projects and fund cleaner alternatives. The German government coalition under chancellor Scholz has vowed to quickly expand the country's role in the transition to green and sustainable investment practices and fully integrate the financial sector in its climate policies.
• Adaptation – Fifteen years after its first climate adaptation strategy, and despite the deadly floods and droughts, Germany is still failing to integrate climate adaptation into everyday decision-making at all levels. The government has adopted a federal climate adaptation law to set the framework. This does not yet stipulate measures, but obliges the government to present a climate adaptation strategy by September 2025 at the latest, and to update it every four years. According to the latest Monitoring Report, Germany must step up its efforts to adapt to the already unavoidable effects of climate change as it faces prolonged droughts, severe water loss and increasing warming. In 2023, the government presented a water strategy and a natural climate action strategy.
• Carbon removal – Forests and wet peatland are among the natural carbon sinks that exist today, but investors are getting ready to develop technological carbon removal and storage solutions. After years of hesitation and a de facto ban on CO2 storage, the quest for climate neutrality has put technological solutions like CCS back on the table to deal with unavoidable emissions. The government plans to present a carbon management strategy in 2023, and is also working on a strategy on negative emissions.
• Climate protests – Following the large success of youth protests led by the Fridays for Future movement since 2018, which helped convince large parts of society that ambitious action is needed, recent more drastic forms of protests such as activists gluing themselves to streets or throwing paint at art works and landmarks such as the Brandenburg Gate provoked mainly negative reactions.
• Raw materials and recycling – The energy crisis fuelled by Russia’s war against Ukraine has pushed the dependence on imports of key raw materials back to the top of the debate in Germany and Europe. The government is working on a circular economy strategy, and has adopted its China strategy. The EU is working on a raw materials act, likely to enter force in early 2024.
• ‘Climate neutral’ products and companies – Companies across the globe have started a race to declare themselves and their products "climate neutral." Hardly a day passes without a firm announcing a net-zero target or launching a product that is supposedly "climate neutral." Most claims still rely on questionable commitments to compensate continued emissions elsewhere in the world, inviting accusations that this trend is nothing but greenwashing. But the decarbonisation drive of entire economies will inevitably result in firms no longer having any impact on the climate.
• 'Franco-German engine' – The European Union faces a multitude of parallel challenges that share the question of how and where it sources its energy in the future. From the increasing urgency to act on emissions reduction over security risks raised by Russia's war on Ukraine to economic stability in a world of rapid industrial change, the two core EU members France and Germany must come clean on the bloc's energy strategy to make it fit for the tasks ahead, but headlines have been dominated by division over the role of nuclear plants, renewables and combustion engines.
• Challenges – Major roadblocks on the path to climate neutrality include a lack of skilled workers to implement renewable energy expansion plans and energy efficiency projects, as well as grid expansion. The government has reformed immigration laws with the aim of filling tens of thousands of vacant energy transition jobs. Separately, network agency BNetzA is set to issue power grid expansion permits on a large scale from 2024, and has allowed distribution grid operators to throttle electricity flows to heat pumps and electric vehicles in a bid to speed up their uptake in the face of challenged distribution grids.

Sector overview

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Tips and tricks

• CLEW’s Easy Guide to Germany’s transition with background information and links to key energy and climate data.