Preview 2026: Germany urged to fight harder to protect EU emissions trading ambition – researcher
[This piece is part of a series of expert interviews to preview energy and climate policy developments in Germany and Europe in 2026. We will publish more in the coming days.]
Clean Energy Wire: How should the German government act on relevant energy and climate policy issues in 2026, and what role do you expect Germany to play at the EU level?
Philipp Jäger: Germany remains a backer of climate objectives, but – as in many other member states – its priorities now lie elsewhere, and tackling the growing economic malaise is the north star of the government’s current agenda.
This means Germany is unlikely to invest significant political capital in safeguarding the climate agenda if this entails high costs. With Brussels being notorious for making package deals between unrelated files to reach agreements, it remains to be seen whether Germany will occasionally sacrifice climate policy to gain concessions on another front.
Moreover, the government doesn’t always have a clear-cut position, given that it is a coalition between Social Democrats and the conservative CDU/CSU alliance. The economy and energy ministry is headed by the conservatives, while the social democrats are at the helm of the environment ministry, and the two often hold diverging views.
In some areas, however, the German position is already relatively clear.
For instance, the German government depicts green standards and regulations as a drag on industry that need to be drastically cut back. It is therefore likely that Germany will, for the most part, support further rollbacks of green standards, as proposed in the various “omnibus” packages.
In the upcoming negotiations on the EU budget in 2026, Germany will favour a strong “Competitiveness Fund”, which will finance, besides other strategic priorities, climate and energy objectives. However, since Germany opposes an increase in the overall size of the EU budget, the firepower of the Competitiveness Fund could be limited.
The German government has also signalled support for green lead markets at EU level. For products with green characteristics, such as green steel or batteries, lead markets can boost demand. These will likely be proposed in the Industry Accelerator Act, which is expected in January 2026, as well as in the revision of the Public Procurement Directive, also expected for 2026.
Germany's government has put emissions trading front and centre of climate efforts. How will this influence EU debates and negotiations in 2026?
The German government has overall reduced the priority it gives to climate action. The reduced ambition is reflected across all key policy instruments: green regulations and standards, climate subsidies – and carbon pricing.
Conservatives in the German government laud carbon pricing as the most effective tool that can render many green subsidies and standards superfluous. However, this rhetorical appraisal is not followed by action – on the contrary. Germany did not throw its political weight behind ETS-2 in Brussels, which has now been delayed by one year. Moreover, given pressure from the German energy-intensive industry, the government is now considering watering down ETS-1. High carbon prices are seen as overly burdensome, instead of as a necessary incentive for the clean transition. But it is simple: if climate objectives are to be reached, you can’t simultaneously demand low carbon prices, keep subsidies low, and cut green rules and standards to a minimum.
Carbon pricing – especially ETS-1 for industry and energy – is a central pillar of the entire climate architecture of the EU. If ETS-1 is substantially watered down in 2026, without massively strengthening other pillars, the whole structure risks collapsing, tanking overall clean investments. This is what is at stake, and Germany and other EU governments that still back climate objectives should do more to safeguard it.
How has the German government influenced EU climate and energy policy in recent months?
The deteriorating state of industry has dominated the German debate recently. The government, therefore, has high stakes in the current agenda in Brussels, which includes numerous initiatives for industry under the umbrella of the EU’s Clean Industrial Deal. Germany is trying hard to influence these files, and has often succeeded. To give just two prominent examples:
A Commission package for the transition of the automotive industry is expected on 16 December. The German government has decided to push for delaying the phase-out of the combustion engine, which the current EU law puts at 2035. Specifically, Germany would like Brussels to allow “highly efficient” petrol cars after 2035, and is wielding its influence on the Commission and other member states to that effect. And it’s working – the 2035 phase-out will, likely, be watered down, although the specifics are not pinned down yet.
However, whether this political success of the German government will translate into an economic one is highly doubtful; the future of the automotive industry will be electric, and sticking with old technology – while hoping for never-to-arrive hydrogen cars and clean fuels – will only make the awakening tougher down the line.
The German government has also successfully shaped the EU’s new state aid framework, CISAF. For the first time, governments can now directly subsidise wholesale electricity prices for energy-intensive industry. Germany had pushed hard for this so that it can implement the so-called industry electricity price subsidy. However, it’s a costly and poorly targeted subsidy, and while it can work as a temporary band-aid, it will not solve the causes underlying the struggles of industry. Other member states should therefore opt for other types of subsidies, instead of following in Germany’s footsteps.
