25 Nov 2021, 11:56

Next German government's key climate and energy plans in 2021 coalition treaty

Two months after the general election in Germany, the prospective government parties have agreed on a coalition treaty that is to guide their policies in the next four years. Entitled "Daring more progress - Alliance for Freedom, Justice and Sustainability," the coalition agreement between Social Democrats (SPD), Green Party, and Free Democrats (FDP) has a strong climate and energy focus, detailing steps such as a coal phase out "ideally" by 2030, and a massive expansion of renewable energies. This factsheet gives a first overview of the coalition agreement's key climate and energy points and will be updated with more detail later. --- UPDATES with more details on natural gas, CO2 pricing, heating & buildings, negative emissions, agriculture

The three parties forming the next government coalition in Germany (pending formal party approval in the next week and the election of chancellor Olaf Scholz on 6 December), stress in their coalition treaty that bringing Germany onto a 1.5°C path is their central task.

Renewable energies

  • In the electricity sector, renewable energies are to have a share of 80% by 2030 as electricity demand increases (to 680-750 terawatt-hours; current government estimated 658 TWh for 2030). To achieve this, their expansion is to be defined as a "public interest" and given priority over other areas of environmental protection, until climate neutrality is reached
  • Use two percent of German land for onshore wind power; begin work on comprehensive planning of these areas in first half of 2022 with federal, national, local authorities
  • Communities near renewables installations should “profit appropriately” 
  • Where wind farms are already in place, it must be possible to replace old wind turbines with new ones without a major approval procedure
  • Offshore wind targets: 2030: 30 gigawatt; 2035: 40 GW; 2045: 70 GW (status 2020: 7.8 GW)
  • Solar PV target for 2030: ca. 200 GW (status 2020: 54 GW)
  • Rooftop solar mandatory for new commercial buildings, “as a rule” on new private buildings
  • Phase out government support to renewable energies once the coal exit is completed
  • Achieve “massive” expansion of renewable energy capacities
    - through Renewable Energy Act (EEG) and other instruments such as long-term power purchase agreements (PPA)
    - through faster approvals, by supporting public authorities with “external project teams”, by clarifying deadlines and requirements in application documents

Coal phase-out 2030, natural gas as a bridge

  • Coal phase-out "ideally" by 2030. If European CO2 price (ETS) falls under 60 euros per tonne, German government will decide on, for example, a national floor price so that the price remains over 60 euros
  • “Natural gas will be indispensable for a transitional period” - Gas-fired power plants are required until security of supply is ensured by renewable energies; should be build at existing power plant sites and in a hydrogen-ready way
  • New government will negotiate solutions with energy companies on how operating licences for gas pipelines and power stations can be granted in a manner that operations can only continue beyond 2045 if using non-fossil fuels. This needs to be done without causing a halt to investments, stranded investments and compensation claims
  • Continue support for just transition in (former) coal mining regions
  • Avoid paing any additional compensation to companies as part of the coal phase-out
  • Examine the establishment of a foundation or company that organises the decommissioning of coal-fired power generation and renaturation.

CO2 pricing

  • To reduce burden on industry and households, the renewable energy surcharge will not be paid via the power price as of 1 January 2023. It will instead be paid for from the federal budget, the income from the CO2 prices on energy, heating and transport
  • Support an increasing CO2 price, combined with a strong social compensation and support for low-income households. “What is good for the climate will become cheaper, what is bad will become more expensive"

  • No increase in CO2 price on heating and transport fuels right now for social reasons, as the price for energy is currently very high due to non-CO2 price related effects

  • Will make a proposal for CO2 price development after 2026; develop a social compensation mechanism (“climate payment”) for consumers

  • Reach a fair division of the CO2 price (on heating) between landlords on the one hand and tenants on the other. On 1 June 2022, the coalition wants to introduce a new model that, based on a building's energy class, regulates the allocation of the CO2 price according to the fuels emissions trade law (Brennstoffemissionshandelsgesetz - BEHG). Should this legislative solution not be possible in time, the increased costs due to the CO2 price will be divided equally between landlord and tenant from 1 June 2022.

Climate action law & negative emissions

  • Reform federal Climate Action Law in 2022
  • Implement an immediate action programme for climate protection
  • Every ministry has to check its law proposals regarding their climate impact and compatibility with the national climate targets (climate check)
  • Compliance with the national climate targets will be monitored on the basis of a “cross-sectoral and multi-year overall assessment analogous to the Paris Climate Agreement”
  • New government acknowledges the necessity of technologically removing CO2 – will develop a long-term strategy for dealing with the approximately five percent of unavoidable residual emissions (~63 million tonnes CO2)
  • Boost sales of climate-friendly products through minimum quotas in public procurement.

EU & international

  • Push for an EU-wide carbon floor price under the ETS
  • Push for the establishment of an EU CO2 price in the buildings and transport sector
  • Support creation of a European Union for green hydrogen to become leading market for hydrogen technologies by 2030 – update the national hydrogen strategy accordingly
  • Initiate (together with European and international partners) an international Climate Club with a uniform CO2 minimum price and a common carbon border adjustment
  • No mention of Nord Stream 2 or German dependence on Russian fossil energy:  The new government wants to cooperate with Russia on hydrogen and climate protection; wants to support Ukraine and strengthen the two countries' energy partnership in particular on green hydrogen production, renewable energies.

Power grids & power market design

  • Present a "roadmap system stability” by mid 2023
  • Accelerate grid expansion procedures
  • Regularily review security of supply and  rapid expansion of renewables - to this end, turn the current monitoring of supply security into a "real stress test"
  • Define “storage” in the energy system
  • Make concrete proposals for new power market design in 2022
  • Evaluate capacity mechanisms and other flexibility options to ensure supply security during nuclear and coal phase-outs
  • In favour of further integration of a European internal power market.

Industry

  • Develop industrial strategy that prevents carbon leakage
  • Create instruments to help industry achieve climate targets, e.g. carbon contracts for difference
  • Support the introduction of an EU wide carbon border adjustment mechanism (CBAM) which has to be in compliance with WTO rules and fit in with the existing emissions trading system
  • Government will ensure competitive electricity prices for industry
  • Make Germany a centre for research, production and recycling of battery cells.

Hydrogen

  • Reach electrolysis capacity of 10 gigawatt by 2030
  • Development of a hydrogen economy on an industrial scale and ensure that Germany promotes innovation and sets new technological standards
  • After infrastructure scale-up, “significantly increase” the targets for electrolysis output; introduce quotas for green hydrogen in public procurement to develop the market
  • Support the production of green hydrogen. But: also support future-proof technologies also when green hydrogen is not available yet “in the interest of rapid market ramp-up”
  • The use of hydrogen is not limited to “certain applications”. But: Use of hydrogen should primarily be in sectors, processes that cannot be made greenhouse-gas neutral through electrification.

Transport

  • Sustainable mobility transition that makes Germany a lead market for e-mobility
  • Target of a minimum of 15 million fully-electric passenger cars on German roads in 2030
  • Proposal by European Commission to only allow CO2 neutral cars as of 2035 means that Germany will have to get there earlier. “Outside the existing system of fleet limits, we advocate that only vehicles that can demonstrably be fuelled with e-fuels can be newly registered”
  • “Massive acceleration” in establishing a comprehensive charging infrastructure
  • Support transition in auto-industry regions towards e-mobility through “targeted cluster support”
  • Create a “strategy platform automobile industry”.

Heating & buildings

  • As of 2025, every new heating system has to be operated on 65 percent renewable energies
  • As of 2025, new buildings may only have 40 percent of the energy consumption of a so-called reference building (so far: 75%)
  • Increase the share of renewable energies in the heating sector; expand local heating networks. Reach a share of 50 percent climate neutral heating by 2030.
  • Support plans for the buildings sector in the European Commission's Fit for 55 package
  • Implement a digital "buildings resource passport" to achieve a circular economy in buildings
  • Launch a national strategy for timber construction, lightweight construction and raw material security

Agriculture

  • Adopt a national moorland protection strategy
  • Develop long-term approach for additional climate protection of forests, e.g. reward forest owners for climate action and creating climate change resilient forests
  • Make changes to the accompanying regulations of the CAP strategic plan to ensure climate action, environment protection and income security for farmers
  • Review the current funding architecture of the CAP by the middle of the legislature; bring animal numbers in line with the targets of climate and water protection
  • Reduce ammonia and methane emissions from livestock considerably, taking into account animal welfare
  • Support farmers during the transition to climate neutrality as part of the restructuring of livestock farming
  • Present a concept how direct payments under the CAP can be replaced with paying for environmental and climate services
  • Tie the development of livestock numbers to the available land area
  • Improve the natural CO2 storage capacity of the oceans by means of a targeted programme for seagrass meadows, algae forests
  • "Actively follow" the European Commission's debate on "Carbon Removal Certification Guidelines"
  • Need to update the soil protection law, create a soil monitoring centre and support the EU with its Soil Directive.
  • Step up research and promotion of climate-friendly crop production and launch a federal programme for Sustainable Arable Farming
  • Continue to develop a protein crop strategy.
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