Vote25: Affordability of transition is key topic for next government – researcher

CLEW: The coalition government of Olaf Scholz has collapsed almost one year before its term was originally scheduled to end. How badly has this affected the progress of important climate and energy policy measures in Germany?

Brigitte Knopf: The coalition’s break-up is threatening much-needed progress in several areas. One major challenge will be preparing the introduction of the new EU emissions trading system ETS 2 that is going to cover buildings and transport emissions from 2027 onwards. Like other EU member states, Germany will have to draft its social climate plans by summer 2025. These are meant to spell out how vulnerable groups in society can be assisted through the transformation. This deadline almost certainly will be missed due to the snap elections.

Another victim of the coalition’s collapse is Germany’s ‘climate money,’ the mechanism through which citizens would be compensated for rising costs of reducing emissions. Disbursements surely won’t happen anymore under this government, but it now looks like all administrative preparations for creating a disbursement infrastructure might also come to a halt. This could become a problem for preparing the ETS 2 introduction as well. Questions like how to scale compensation payments according to social needs should be answered before the summer. But it could well happen that nothing gets done anymore until then, I’m afraid.

How is this going to impact climate and energy policy negatively?

The ETS 2 will lead to higher prices for fossil heating systems and mobility and there’s a great risk at this point in time of new uncertainties being created ahead of the snap elections. Debates on reversing the Building Energy Law, which set out a roadmap for decarbonising the heating sector, are creating doubts among private households and businesses about support payments that could end up delaying any meaningful progress. Everyone would benefit from sticking to the pre-agreed roadmap.

Besides these shortcomings, what did the government do achieve in climate and energy policy during its roughly three years in office?

The coalition managed to close the “climate gap” in Germany’s envisaged emissions reduction to a large extent. This was thanks to a range of individual measures but especially the climate action package from 2023. While the Council of Experts on Climate Change still considers the measures as insufficient for reaching the country’s 2030 climate targets, they did bring substantial improvements.

So has the outgoing coalition been a boon for climate action after all?

That depends on which sector you look at. A lot has happened in the electricity sector, where the expansion of renewable power installations has made solid progress. If you consider the buildings or transport sector, on the other hand, too little is happening still – despite some innovative approaches such as the `Germany ticket’, the monthly flat-rate fare for using public transport across the country. The overall balance regarding climate action has been improved under Scholz’s government coalition, but progress especially in the transport sector continues to be far from sufficient. What this means for the overall emissions budget with respect to the 2030 targets remains to be seen. This is especially important in the EU context for reaching Germany’s effort sharing targets.

The government coalition’s time in office was characterised by a series of international crises, including the pandemic, the energy crisis, and Russia’s war on Ukraine. Has this been a burden or maybe even a boost for achieving progress in climate and energy?

The energy crisis has created a dynamic in certain areas that otherwise would have been difficult to imagine. Amongst other things, this includes energy saving measures by households and businesses, a temporary boom in heat pump sales or the introduction of the ‘Germany ticket.’ However, besides putting several effective emergency measures in place, the government failed to fully seize this momentum and use it as a foundation for further steps.

The next government will likely only start its work several weeks or even months after the elections at the end of February. Do you think anything will get done at all before that?

We’re likely to face a difficult period until about mid-2025, meaning there will be about half a year of standstill in policymaking. While the parties might be able to agree on some sort of industry support in the interim, there is a risk of deep uncertainty among companies in the coming months.

If you look at the energy and climate policy ideas put forward by the largest opposition party, the conservative Christian Democrats (CDU), do you think we will see a major turnaround in key policy areas if the CDU gets to head the next government?

Regarding the energy policy position paper the party released recently, their ideas are not even that far away from what the outgoing coalition has implemented. We can expect them to add formulations such as greater “technology openness” to certain policies but so far, I cannot see a substantial turnaround in key areas. Calls for reversing the Building Energy Law are hopefully to remain a rhetorical ruse. However, it is a very important signal from the CDU that the stated in their position paper that they will stick to the target of achieving climate neutrality by 2045.

Which debates is the next government likely to face first when it comes to climate and energy?

The introduction of the ETS 2 and how to deal with the rising costs for citizens certainly is going to be an important question for the next government. I see more overlapping in the policy positions of the Greens and the CDU in this respect than I see between the CDU and the SPD. Both the Conservatives and the Greens want to stick to the agreed CO2 price mechanism, while the SPD is likely to call for capping the carbon price. Financing the transformation will certainly remain a key topic also during the next term.

Do you think the next government will have to implement a reform of Germany’s ‘debt brake,’ the constitutional limit on new government borrowing?

The CDU will likely have to take on reforming the debt brake in the next government. The revenues from carbon pricing alone won’t be enough to cover the enormous costs that any new government is to face. There is openness to a reform in the party if you look at CDU-led state governments, which are already struggling with the debt brake’s limitations. We might even see a reform before the snap election, given that there’s a risk of populist parties obtaining a large enough minority in the next parliament to block reforms.

Beyond the elections, which topics do you think will shape the climate and energy debate in the next year?

There continues to be much awareness among the German population about the challenges posed by global warming, but people are no longer as enthused about climate action as they perhaps were a few years ago. Affordability is currently the dominant topic – and that’s where policymaking needs to intervene. This includes policies that come with customised pricing and support schemes, for example to make electric vehicles more affordable for low-income households. It also needs better communication to make people aware of what they stand to gain from the transformation, for example by having better air quality in inner cities.

Apart from that, it would make a lot of sense to consider new approaches for better integrating climate action across the whole of government. How can we overcome the self-centeredness of individual ministries and achieve joint targets? We will have to define cross-sectional goals within the next government that allow for a mission-oriented form of government at least as far as climate action is concerned.