What Germany's 2025 coalition agreement says on climate and energy

The parties forming Germany's prospective next government, the conservative Christian Democrat Union and Christian Social Union (CDU/CSU alliance) and the Social Democrats (SPD), have presented their coalition agreement. The document outlines policy proposals for their legislative term that is scheduled to last until early 2029, with the agreement paving the way for CDU leader Friedrich Merz to be sworn in as Germany's next chancellor on 6 May.

The parties agreed to stick to Germany's 2045 target to become climate neutral, to reduce energy prices to increase competitiveness and ramp up investments in the country's ailing infrastructure. 

Industry and business

• Use new 500-billion-euros infrastructure and climate neutrality fund to “systematically modernise” Germany; will define “clear targets and fields of investment”; introduce law to speed up planning, permitting and financing of urgent projects; ten billion euros will go into the Climate and Transformation Fund (CTF) each year
• Revisit spending through CTF to increase efficiency, CO2 mitigation, social fairness
• Use CO2 price revenues for climate neutrality investments, and to reduce electricity prices for companies and households by at least five cents per kilowatt hour (average power price in 2024 was 41.2 ct/kWh for households and 20.5 ct/kWh for non-households)
• The electricity tax will be cut to the European minimum and grid fees be reduced as well, ideally with a permanent cap on grid fees
• Extend and expand CO2 cost subsidy (electricity price compensation) to more energy-intensive sectors 
• Energy-intensive companies that cannot be supported otherwise and lack flexibility in adapting their operations will get access to a special industry power price
• Gas storage fee will be abolished
• Create lead markets for climate-friendly products through quotas for low-emissions steel production or public procurement regulations; introduce exemptions from public procurement law, particularly in matters of national security and for lead markets for low-emission products in the basic materials industry
• Continue with funding programmes for the decarbonisation of industry, including "climate contracts"
• Reduce primary resource consumption, support projects for domestic critical raw material extraction and processing in Europe (replenish national raw materials fund)
• Steel industry is of central strategic importance for Germany, “we will keep it and make it future-proof, and support it in the transformation of production processes on the way to climate neutrality,” also through CCS (carbon capture and storage)
• Introduce a "Germany fund" worth at least ten billion euros and guarantees for investments in the country
• Germany’s national Supply Chain Act (Lieferkettengesetz) will be abolished and replaced with a law on international corporate responsibility that implements the EU’s due diligence directive CSDDD
• More support for nuclear fusion research with the goal of having the world’s first fusion reactor in Germany
• Assess how to support converting existing car factories to armament production

Renewables, fossil fuels and the electricity system

• Re-assess by summer 2025 future electricity demand; status of energy security, grid expansion, renewables expansion, digitalisation, hydrogen ramp-up as basis for further work
• Renewable power installations should be made ready to fully finance themselves on the market. The further expansion and the installation of adequate storage capacity likewise should be achieved through “a greater use of market instruments”
• Support should be made more conducive to stabilising the power system by integrating storage units and feed-in mechanisms. Private household should get easier access to installing solar PV and the dual-use principle, for example for agriculture and solar power, should be expanded
• Spatial needs for wind power will be re-evaluated for the 2032 target year (current target: 2% of Germany’s surface area to be reserved for onshore wind power by 2032). Direct access options for citizens and companies should be strengthened.
• Cooperation with North Sea neighbour countries should be intensified to achieve an optimised installation pattern for offshore wind turbines
• Will enable offshore wind parks “hybrid” connection to mainland (power line & pipeline for hydrogen)
• Introduce improved law to speed up geothermal energy expansion “as quickly as possible”
• Coal exit: Stick to the agreed lignite phase-out deadline of 2038 at the latest; coal plant shutdown timetable depends on buildout of alternative power plants; present delayed coal exit reports right away
• Enable long-term, diversified and cost-efficient international gas supply contracts (in line with climate targets)
• Use potential of conventional domestic gas extraction
• Up to 20 GW of new gas-fired back-up power plants should be built through “technology-open auctions as soon as possible.” The plants should be constructed at existing plant locations to balance regional needs.
• Power plants from the reserve fleet in the future no longer should only help bridge supply gaps but also “serve to regulate electricity prices”
• A “technology-open and market-oriented” capacity mechanism should provide a “system-supporting technology mix” including bioenergy, combined-heat-and-power plants, storage units and flexibility options
• The parties reject the splitting of Germany’s uniform power price bidding zone
• New high-voltage direct current electricity transmission lines should be built above-ground where possible; introduce regular monitoring of grid expansion needs
• Speed up smart metre rollout, strengthen dynamic power price contracts

Transport

• “Clear commitment” to the car industry and jobs, based on “technology neutrality”
• Embrace electrification of vehicle fleets, but reject legal quotas
• E-mobility support
• Using “purchase incentives” for EVs
• Via: additional tax incentives for company and private electric cars
• Exempt e-cars from car tax until 2035
• Support programme for low-income households for switching to e-mobility (financed through EU Climate Social Fund)
• Support for plug-in hybrids and electric cars with range extender
• More support for broad rollout of charging infrastructure for cars and trucks
• Toll exemption for zero emission trucks; support for a “hydrogen charging” network for trucks
• Continue subsidised flat rate regional and local public transport ticket (“Deutschlandticket”), with increasingly higher share of price paid by users (from 2029)
• Increase rail investments, speed up rail electrification, move more freight transport from roads onto rails
• Increase commuter allowance to 38 cents per kilometre
• Make driving licenses cheaper
• Support walking and cycling as part of sustainable mobility
• Reverse aviation tax increase; immediately abolish aviation power to liquid quota that exceeds EU rules
• Ensure that European airlines are not disadvantaged in the Sustainable Aviation Fuel (SAF) quota
• Strengthen European and national space industry programmes

Climate adaptation

• Implement the climate adaptation strategy, use existing funding programmes
• Put financing for climate adaptation "on solid footing" with federal states, examine making this a "joint task"
• Accelerate flood and coastal protection measures
• Strengthen urban development, adapt city centres and social infrastructure to climate change
• Implement prioritised measures of Germany's water strategy and continue to develop it further

Several issues which were election campaign promises or have been debated in Germany for some time did not make it into the agreement. Many of these were key crunch points between the parties on which experts have called for action. The fact that the issues are not mentioned now does not rule out that the government will tackle these throughout the legislative period.

• 2035 EU combustion engine phaseout (conservatives aimed to reverse it)
• Speed limit on the country’s motorways (SPD supports, conservatives reject)
• No mention on reassessment of completed nuclear fission phase-out (demanded by conservatives)
• Climate bonus as an instrument to return carbon price revenues to citizens (instead, revenues will be used to lower electricity prices for citizens AND companies)
• E-car target: previous governments have set the target of having 15 million e-cars on German roads by 2030; this target is not mentioned
• No mention of a plan or target to exit the use of fossil gas in Germany
• No mention of completing the country's coal phase-out before the agreed 2038 deadline (previous gov't "ideally" aimed for 2030)
• No details on what Germnay's 500-billion euro special fund for infrastructure and climate neutrality will focus on