Energy and climate crunch points in Germany's upcoming coalition talks

Germany's conservative CDU/CSU alliance has emerged as the winner in Germany's snap election, and is set to form a coalition government with the Social Democrats (SPD). Given the seat distribution in the new parliament, and the refusal of parties to cooperate with the far-right Alternative for Germany (AfD), this is by far the most likely option for the composition of the next government. The camps are already used to working with each other, as they have repeatedly formed coalitions in the past - a combination often referred to as a "grand coalition".

There is a fair amount of overlap between the parties' plans for energy and climate policies, but they will have to overcome disagreements over some details and priorities. Broadly speaking, the conservatives tend to favour a more market-based approach, including tax breaks and deregulation, while the Social Democrats put more emphasis on a bigger role for the state and social policies. The conservatives' priorities often align with business interests, while the Social Democrats tend to favour labour union positions. When it comes to the energy transition, these interests often align – both the business community and the unions agree that pursuing the path to net zero is in Germany's long-term interest. 

In contrast to the Greens, who form part of the outgoing government, climate policies are not the top priority for either of the future coalition partners. This is why it appears unlikely that energy and climate policies will constitute a make-or-break topic in the upcoming negotiations. Agreement in other areas could be much more difficult to achieve - for example on the question whether and how Germany's constitutional debt limit, often called the "debt break", should be reformed (see below) - a question that is not only relevant for defence spending, but also for future climate and energy policies, as it will determine how much money the government will be able to spend.

Major overlaps in climate and energy policies

The conservatives and the Social Democrats broadly agree on:

• sticking to Germany's target of becoming climate neutral by 2045
• pushing forward the energy transition in all sectors of the economy, including industry decarbonisation
• reducing electricity costs for households and industry by reducing grid fees and cutting electricity taxes
• continuing the buildout of renewables, the electricity grid and storage solutions
• the need for a capacity market and gas-fired power stations as a back-up for renewables to guarantee supply security
• some form of social compensation mechanism ("climate bonus"), even though the conservatives are very vague on the details

Major disagreements over climate and energy policies

In contrast, the parties would likely have to find compromises on the following points in particular:

• Oil and gas boiler phase-out: In its election manifesto, the CDU/CSU alliance says it supports low-emission heating solutions independent of technology, and pledges to abolish the contentious "heating law," the outgoing government's legislation that aimed to gradually phase out fossil fuel boilers. However, given that this was an incredibly complex and protracted process, and that the law was passed by a government that included the SPD, the party is unlikely to agree to do away with it.
• Government borrowing for future investments: The SPD calls for a reform to the debt brake – Germany's constitutionally enshrined limit on new government borrowing – to enable future investments. While the CDU/CSU does not rule out a limited reform, it would like to stick to the debt brake in principle, and set strong incentives for private investors.
• Nuclear energy: The CDU says it would like to explore whether Germany's nuclear plants that were last phased out could run again at reasonable technical and financial cost. At the same time, the party is betting on research on nuclear fusion and small modular reactors. In contrast, the SPD rejects a return to nuclear energy, which is also deemed highly unlikely by most experts.
• Supply chain sustainability: Under the idea of reducing burdens, the CDU calls for the abolishment of Germany's supply chain law, which regulates corporate sustainability for respecting human rights in supply chains, and to put a stop to Europe's Taxonomy and Corporate Sustainability Reporting. The SPD, on the other hand, stands by sustainability reporting.
• End to combustion engines: The CDU wants to reverse the EU’s 2035 combustion engine phase-out, whereas the SPD wants to stick to it.