The German Minister of Economy seeks a non-partisan climate deal. What is he proposing and what else can we expect from the German government

By David Wortmann, CEO DWR eco

In politics, it’s customary to “go on summer break.” Parliaments no longer meet; politicians go on holiday or on “summer tours” of their voting districts. This quiet period is over now. Regional parliaments are already back in session; in Brussels, European governance has started again; and in Berlin, the first Bundestag session started in the second week of September.

But unlike governments, the global climate crisis did not go on summer break. On the contrary: the polar ice cap has never been as thin as it was the past months. Ice loss in the Arctic over the last 40 years now amounts to a mass eight times the size of Germany. And at 38 degrees Celsius, Siberia has never been so hot, its forests on fire.

Will Germany’s political autumn be equally hot? Or is the grand coalition already slipping into inaction with a view to the 2021 federal election? 

The German Minister of Economy Peter Altmaier has now proposed a historical non-partisan action planbefore next year’s general election to finally combat climate change. What are the proposals:

• “Climate neutrality" of Germany until 2050 with an annual reduction plan of greenhouse gas emissions
• A “guarantee” of economic growth within the boundaries of climate protection
• A certain percentage of German’s GDP should be set aside to combat climate change
• Public Institutions should become “climate neutral” 2035
• A public “scoreboard” that displays the achievements of the government, companies and organizations to become “climate neutral”.
• A “certification system” to certify the “climate neutrality” of an institution
• Companies and institutions can participate in “Carbon Contracts for Difference” to become “climate neutral” ahead of the official reduction targets 
• Introduction of a “matching mechanisms” that brings together the necessary amounts of energy and hydrogen demand and supply
• Principle of “market mechanisms” to reduce greenhouse gases, primarily through ambitious EU and national CO2 prices.
• CO2 auctions
• Amendment of the German FIT/EEG mechanisms to be compatible with a European wide energy market
• Reduction of FIT/EEG levies
• Compensate economic disadvantages of products produced in line with carbon reduction objectives
• Introduction of a label called “Clean Products made in Germany”
• Founding new institutions: “Federal Foundation of Climate & Economy”, information center “house of the energy transition” to display achievements in the energy transition, a European international agency “climate global” to promote global climate measurements, a “climate and industry council” for the German Ministry of Economy, an international “climate university”

How ambitious and effective this plan really is, I will evaluate in a separate post. How much traction this plan will get with other political parties or Peter Altmaier’s own party is also open.

What else can – and can’t – we expect from this governing coalition when it comes to climate and energy policy this fall? 

A brief overview of the most important topics: 

• Revision of the Renewable Energy Sources Act (EEG): the technology-specific trajectories for further expansion of the individual renewable energies must be redefined. The government must determine how much wind, solar, and other renewable energy facilities must be expanded annually in order to at least reach the target of 65% renewable energies by 2030. And there’s another decision that cannot be postponed: how to deal with all the old facilities now that they’re losing their EEG allowances after 20 years? Simply turning them off would be lunacy, both from an economic and regulatory perspective;
• Offshore Wind Energy Act: the expansion target for offshore wind facilities will likely be raised to 20GW by 2030 and 40 GW by 2040. Since these amounts will be tendered, the maximum permissible bid values should also be adjusted;
• Reform of grid charges: in fact, a plan to do this was formulated in the 2016 coalition agreement; so far, little has been done to distribute grid costs in a way that is fair to the user or to create incentives for the flexibility and utility of renewable energies; 
• Preparations for the introduction of dynamic electricity tariffs and the reduction of state-induced electricity price components like levies, taxes, and fees. This is a stipulation from the EU’s Directive on common rules for the internal market for electricity and Regulation on the internal market for electricity that the German federal government has yet to implement. In the meantime, pressure from several German state governments to reform the existing tax and levy system has also increased. It is unlikely that any specific decisions will be made;  
• Changes must be made by January 1st, 2021 to the Fuel Emissions Trading Act and to a number of ordinances for implementing CO2 pricing, particularly for the start of CO2 pricing in the transport and heating sector;
• The contract between the federal government and the coal companies to phase out coal-based power generation and provide compensation payments has yet to be discussed and approved by the Bundestag;
• Revision of the Energy Industry Act for the procurement of system services by network operators; 
• Apartment Modernization Act: this legislative proposal seeks to remove existing barriers to the installation of electric charging infrastructure by homeowners and tenants; 
• Building Electromobility Infrastructure Act: the amended EU Energy Performance of Buildings Directive requires that this German law also be amended. Furthermore, there may be an obligation to install charging or line infrastructure in certain residential and non-residential buildings planned for construction;
• Hydrogen: it was only just before the summer break that the federal government decided on its long-awaited National Hydrogen Strategy (NWS) to get green hydrogen up and running by 2023 and scale it by 2030. The binding roadmap consists of a total of 39 measures to stimulate production and demand for green hydrogen and to develop the necessary infrastructure and international partnerships for that purpose. All measures of the strategy are to be initiated this year. So, for example, an EEG levy exemption for electrolysis currents could be implemented within the framework of the EEG amendment using the special compensation regulation in order to gradually close the cost gap between gray and green hydrogen. In addition, an ambitious implementation of the EU Renewable Energy Directive (RED II) to regulate the use of green hydrogen in fuel production is still pending.

Of course for each of these undertakings, the devil is in the details. Many companies are currently coming to us for help figuring out how exactly their business models will be affected and how they can bring their technical expertise to the ongoing processes. Overall, though, the projects are still too weak, too few, and too unambitious in the face of the rapidly developing climate crisis, the necessity of a swift conversion to 100% renewable energies, and the goal of a zero carbon economy. In addition, the minister of economy Peter Altmaier has announced a comprehensive climate protection initiative. Expectations are high, because among other initiatives, it should include proposals of systematically dismantling of climate-damaging subsidies, a mobility and transport revolution that provides clear incentives for public and private sharing services. 

There’s not much time left in the current legislative period. In mid-December, political operations will once again shut down, re-emerging briefly in mid-January after the winter break. There’s still a small window of action for new projects until Easter 2021. After that, the grand coalition will dissolve its temporary democratic alliance in preparation for the September 2021 elections. Starting in summer 2021, the parties will again begin to emphasize their differences in order to make voting decisions easier for citizens. Party headquarters are already setting the course for their election platforms and the coalition agreement of the next federal government. The challenges posed by climate change are immense – but so are the opportunities for green economic growth!

For more information contact David Wortmann, wortmann@dwr-eco.com