29 Mar 2023, 14:19
Julian Wettengel

German coalition ends climate policy deadlock with contentious reform plans

Photo of a regional train in Germany. Photo: Nordbahn.
The government coalition wants to use revenues from a new CO2 surcharge on the truck toll for rail infrastructure development. Photo: Nordbahn.

The German government coalition has overcome a month-long dispute with a deal on comprehensive reforms in climate and environmental protection, the acceleration of major infrastructure projects, and billions for the modernisation of Germany's ailing rail network. The deal, which came after two and a half days of intensive negotiations between the Social Democrats (SPD), Green Party, and Free Democrats (FDP), received praise and criticism. Student climate activist group Fridays for Future heavily criticised the agreement as a “failure by ‘climate chancellor’ Scholz.” Environmental NGOs and climate activists called the proposed reform of Germany’s climate law a “sin against all future generations” that weakens accountability by individual ministries, while economists said the proposal could lead to more efficient climate action.

Germany’s three government coalition parties aim to reform the country’s climate law, put more money into rail expansion and support for climate-friendly heating systems, and speed up construction and permitting for crucial infrastructure projects. The parties made the announcement after month-long disputes and a marathon of meetings in Berlin. Several economists welcomed the result of the negotiations between chancellor Olaf Scholz's Social Democrats (SPD), the Green Party and the Free Democrats (FDP), while environmental NGOs called the brokered deal an “absolute catastrophe”.

The coalition has been waging a long public battle over pending climate policy decisions, including a possible ban on oil and gas heaters or the construction of new motorways. The coalition wanted to present a comprehensive climate action policy programme by the end of last year, but it has been delayed indefinitely by internal differences.

“Our country needs more speed, a ‘Germany speed’, not only when it comes to approving LNG terminals on the coasts, but also for everything else that we need for a good future, economic prosperity, and also to stop man-made climate change,” chancellor Scholz told MPs during a speech in parliament.

There was both praise and strong criticism on the deal. Economist and government advisor Veronika Grimm said the coalition’s proposals are a “good message for climate action”, as they would help protect the climate “as cost-effectively as possible”.

Student climate activist group Fridays for Future heavily criticised the agreement as a “failure by ‘climate chancellor’ Scholz” – especially the decision to speed up certain motorway projects and to reform the climate action law. In light of missed climate targets by the transport sector the deal represented a step in the wrong direction, the organisation said in a press release and is now calling on supporters to join a protest in Berlin this week Friday (31 March). One week after the Intergovernmental Panel on Climate Change (IPCC) had made it clear that the world is at a dramatic tipping point, the coalition “decided to pretend that they more or less don't care […] and shocks with its willingness to wave through 144 motorway projects,” said climate activist Annika Rittmann.

Economy minister Robert Habeck (Green Party) said that debates such as that about replacing home heating systems are particularly difficult, as the targeted changes directly affected people’s lives. “When we talk about transport, about the future of car mobility, about heating, about the way people live their lives, these are not political planning games, but in view of the urgency of this debate, really affecting people's realities quite immediately,” said Habeck at the Berlin Energy Transition Dialogue (BETD) conference. “This is necessary and difficult.”

Climate law reform “sin against all future generations” – NGO

As a key element of the deal, the government is set to “soon” decide a reform of the climate action law, together with the long-delayed comprehensive climate programme promised in the coalition agreement.

In essence, the reform would shift the focus away from annual emissions reduction targets for each sector – and obligatory short-term programmes of measures if the targets are missed – to a cross-sectoral view and a focus on 2030. This means if a target in one sector is missed, another sector can compensate for it. If emissions projections for two consecutive years show that 2030 targets for aggregated greenhouse gas reductions are likely to be missed, the government must decide on a programme of measures for all sectors.

Fiercely rejeceting these changes, the reform represents a “sin against all future generations”, said Jürgen Resch, co-head of the NGO Environmental Action Germany (DUH). The climate action law is severely weakened without the responsible ministries being committed to annual reductions – “and this will lead to Germany reneging on its obligations under the Paris Climate Agreement to limit global warming”, said Resch.

Chancellor Scholz said the climate law needs to be reformed to make it ready for a climate neutral economy by 2045. He argued that the law has to take into account dynamic changes, not assume a linear development. "Plain, simple, unreflected and linear thinking that only looks at the situation year by year and does not take into account what happens in the following years, leads to wrong decisions," he said. “If, for example, affordable electric cars are available in large numbers from 2025, that will change what is on offer,” said Scholz.

Key energy and climate provisions of the deal

  • Government to propose reform of climate action law “soon”
    • Annual emissions reduction targets remain on paper, but missing target no longer stipulates immediate proposal of measures to get sector back on track
    • Instead, aggregated emissions target for all sectors in 2030 is guideline
    • If projections data show likely 2030 target miss for two years in a row, government will decide programme of measures in all sectors, “especially those responsible for target miss”
    • Every new government presents comprehensive climate action programme in first year of term to ensure targets are met
    • Government will decide target for negative emissions 2035, 2040 and 2045 (natural sinks + technical such as direct air capture and carbon storage – DACCS)
  • Develop proposal for EU climate policy post-2030
    • Wants to make effort sharing regulation “more flexible so that efficiency benefits and price signal of pan-European emissions trading can have a greater impact”
  • Building energy law to be decided in April
    • Every newly installed heating system is to be powered by 65 percent renewables “if possible” from 2024 (per previous agreement)
    • State subsidies for switch away from oil/gas heaters from federal climate and transformation fund (nothing on volume)
    • “Technology-neutral” approach with sufficient transition periods
  • From 2024: CO2 surcharge on truck toll: 200 euros per tonne CO2
  • Rail modernisation investment needs of about 45 billion euros by 2027 to be covered also through CO2 surcharge on truck toll
  • Renewables installations alongside new motorway construction, pushed also for existing motorways 
  • Speed up planning and permits for key infrastructure projects
    • “Overriding public interest” of key rail and road development projects
    • More options for local communities to designate areas for wind power
  • Regulatory incentives for ramp-up of e-fuels + e-fuel strategy
  • Obligation for petrol stations to install at least one fast charging point within 5 years
  • CO2 neutrality to become suitability criterion for car sharing fleets from 2026

However, economist Veronika Grimm welcomed the proposed reform. “The reform of the climate law with a view to temporal and intersectoral flexibility is a good thing – provided the emission reduction targets are met,” she told Rheinische Post.

The law reform would also introduce targets for negative emissions in 2035, 2040 and 2045 not only from natural sinks – as is currently the case – but also from using carbon capture and storage (CCS)-based methods.

“The announced change in these targets will further intensify the discussions on so-called residual emissions”, said researcher Felix Schenuit, from the German Institute for International and Security Affairs (SWP). This debate is about potentially unavoidable greenhouse gas emissions, for example from certain industrial processes or methane emissions in agriculture.

Germany aims to develop proposal for EU climate policy post-2030

The decisions made last night could also affect EU climate policy, as the coalition agreed to push for changes to the effort sharing regulation for the years after 2030. This regulation sets country-by-country greenhouse gas reduction targets for sectors such as transport and buildings.

Similar to the reform of the German climate law, the coalition aims to take a more cross-sectoral approach. The push for reform would “include examining ways to make the European Effort Sharing Regulation more flexible so that the efficiency benefits and price signal of pan-European emissions trading can have a greater impact”, says the paper.

More money for railway modernisation and weakened provisions on new climate-friendly heating systems

The agreement also foresees rail modernisation investment needs of about 45 billion euros by 2027, which according to the proposal would in part be covered through revenues from Germany's truck toll. From 2024, there would be a new CO2 surcharge of 200 euros per tonne of CO2.

The group of railway sector companies Allianz pro Schiene sees “huge progress” in the fact that revenues from the truck toll would be used to finance railway development. However, there were shortcomings, said the NGOs managing director Dirk Flege. “In the transport sector in particular, the 16-page "modernisation package for climate protection and planning acceleration" contains a hodgepodge of sometimes contradictory individual measures that are disappointing overall,” he said.

A de facto ban on new oil and gas heating systems from 2024, proposed by the economy ministry in a first draft of amendments to the building energy law, was among the most contentious issues over recent weeks. The Free Democrats under finance minister Christian Lindner had rejected what it called overly strict rules.

The coalition now seems to have agreed to weaken these rules and proposes an approach that does not focus on any specific technology, such as heat pumps, and provides for longer transition periods. For example, ministries were currently debating under which conditions gas heaters would considered to be hydrogen-ready and could be installed even after 2024, said economy ministry state secretary Patrick Graichen. “It has to be said that hydrogen heaters will certainly only be the solution in individual cases, not for the masses, simply because hydrogen will be scarce and expensive for heating,” Graichen said.

To ensure that citizens “are not overburdened”, the government plans financial support, which will be taken from the state’s climate and transformation fund. “No one is left out in the cold,” says the coalition's agreement.

However, it gave no details on the volume of the support. “We are now in the process of designing the details of the funding programmes,” chancellor Scholz told MPs.

All texts created by the Clean Energy Wire are available under a “Creative Commons Attribution 4.0 International Licence (CC BY 4.0)” . They can be copied, shared and made publicly accessible by users so long as they give appropriate credit, provide a link to the license, and indicate if changes were made.
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