Q&A: First climate and energy proposals from Germany’s future coalition government

1. What did the parties agree on regarding energy and climate?
2. What is not in the document?
3. How did stakeholders react?
4. What happens next?

Climate

“We stand by the German and European climate targets, knowing full well that global warming is a global problem and that the world must solve it together.”

• “Work resolutely” to meet climate targets
• Reconcile climate protection, social equity and economic growth in a “pragmatic and unbureaucratic way”

Budget, finances, economy

“With a special fund of 500 billion euros, we are getting our country back into shape – by investing in roads, railways, education, digitalisation, energy and healthcare.”

• Create a special infrastructure fund totalling 500 billion euros
  • Used for investments, “especially for civil protection and civil defence; transport infrastructure; hospitals; energy infrastructure; education, care and science infrastructure; research and development; digitalisation”
  • 100 billion euros is to be spent by states and municipalities
  • Implementation of the fund requires constitutional reform and a two-thirds majority in parliament
• Set up investment funds (public guarantees and private capital), e.g. for venture capital, residential construction and energy infrastructure
• Introduce corporate tax reform
• Support Mercosur agreement and the conclusion of new free trade agreements, including with the U.S.

Energy sector

“Our aim is to achieve permanently low, predictable and internationally competitive energy costs.”

• Introduce incentives to build up to 20 gigawatts of gas power plant capacity by 2030 through a new power plant strategy (primarily at existing sites)
• “Utilise potential of all renewable energies” by “resolutely” expanding wind and solar electricity in a grid-friendly way, and expanding bioenergy, hydropower, geothermal energy and storage capacity
• Reduce electricity price by “at least 5 cents per kilowatt hour” by reducing electricity tax to EU minimum and halving grid fees
• Goal: “permanent cap of grid fees”
• Extend and expand CO2 cost subsidy (electricity price compensation) to more energy-intensive sectors 
• Advance grid expansion “quickly, purposefully and cost-efficiently”
• Reserve electricity capacity should be used to prevent supply bottlenecks and in the future to also stabilise electricity prices
• Strengthen nuclear fusion research (“Our goal is to build the world's first fusion reactor in Germany.”)
• Nuclear energy (fission) not mentioned

Industry

“It is in our interest to keep strategically important industries in Germany or to attract new ones, e.g. the semiconductor industry, battery production, hydrogen or pharmaceuticals.”

• Adopt a legislative package to allow carbon capture and storage (CCS) “especially for hard to avoid industry emissions immediately at the start of new legislative period”
• Create lead markets for climate-neutral products, e.g. through quotas for climate neutral steel, green gas quotas and procurement rules
• Hydrogen core grid must connect industrial centres across Germany

Transport

“We are clearly committed to maintaining Germany as an automotive business location and its jobs.”

• Introduce a new purchase incentive for electric vehicles
• Not focusing on just one automotive technology
• Push to prevent fines for exceeding EU car fleet CO2 limits
• Support suppliers in transformation to climate-friendly transport
• “We will discuss”:
  • Continuation of flat rate public transport ticket (Deutschlandticket)
  • Expansion and modernisation of local public transport
• Expand cross-border transport infrastructure to neighbouring Poland and Czechia

Buildings

“We want to make housing affordable, available and environmentally friendly for everyone.”

• Simplify construction by quickly introducing “building type E”

Agriculture

• Reintroduce tax rebates for diesel fuel used in agriculture

Industry and business

• Energy industry association BDEW: "The energy policy proposals address the right issues and urgent tasks. However, the heating sector has obviously been completely forgotten," said BDEW head Kerstin Andreae.
  "It is positive that our long-standing demand for a reduction of the electricity tax to the European minimum is finally within reach and also that a subsidy for grid fees is planned," she said, adding that reduced electricity prices would strengthen Germany's competitiveness as a business location and increase the financial attractivity of heat pumps and electric vehicles.
  Andreae added that it was important to continue to expand renewables "in a determined and grid-friendly manner" and link storage facilities "in a clever way". "The addition of controllable power plants is also urgent," she said. "Radical de-bureaucratisation and a clear roadmap for the climate targets must now be at the top of the agenda."
• Local utility association VKU: "We see our demands reflected regarding reliability, political realism, and investment in many points," said VKU head Ingbert Liebing. He welcomed the planned special fund for infrastructure worth hundreds of billions of euros: "We urgently need to make massive investments in the expansion and upgrading of our infrastructure in Germany, and this applies particularly to our energy, water and wastewater infrastructure."
  Liebing welcomed plans to reduce electricity prices, enable carbon capture and storage, expand electricity grids and the core hydrogen network, as well as the support for new gas-fired power plants.
• Renewable energy association BEE: Renewable energy industry association BEE primarily welcomed the planned special fund for infrastructure. "It has been clear for a long time: Germany needs more investment in the future. In particular, the energy transition infrastructure and digitisation must be consistently expanded," BEE head Simone Peter said. "In further negotiations, this must be prioritised with a view to climate neutrality and thus an improvement in international competitive conditions, and secured in a way that is consistent with the constitution."
• Industry association BDI: Germany's most important industry association, BDI, called for more clarity, arguing that the agreement still lacked an overall concept and direction for the transition. "It is good that the CDU/CSU and SPD are prepared to finance the urgent tasks for Germany's security and modernisation," said BDI head Peter Leibinger. "The recognisably target-oriented intentions must be underpinned by ambitious measures. […] There is still a lot of work to be done here."
  The BDI saw the planned halving of transmission grid fees and price compensation for energy-intensive companies as positive contributions towards lower electricity prices. "Support for the establishment of strategic industries, such as the semiconductor and battery industry, is to be welcomed," Leibinger said.

Civil society

• Environmental NGO Germanwatch: "Germanwatch demands that investments from special funds help to achieve climate targets and enable additional international climate financing," the environmental NGO wrote as a reaction to the preliminary agreements between the CDU/CSU alliance and the SPD. It added that national climate protection played only a vague role in the draft agreement on the special infrastructure fund, while international climate protection was completely ignored.
  The NGO was also critical of the draft's approach to security "as a one-dimensional military issue", with policy director Christoph Bals stating that "There can be no security for Germany and Europe without adequate climate protection."
• Mobility NGO VCD: VCD said it was very important for future investments in transport infrastructure to be sustainable, adding that the purposes of the planned special infrastructure fund worth hundreds of billions of euros were not specific enough. "The issue [of long-term and reliable financing] is too important to be decided without clear guidelines on exactly how the funds are to be used. The current proposals resemble a black box," VCD chair Kerstin Haarmann said.
  "We demand that the funds be used in a targeted manner, prioritising green infrastructure. In the transport sector, this includes the renovation of roads, railways and bridges and the expansion of bus and rail services," Haarmann said.
• Environmental NGO Greenpeace: Greenpeace also pointed to unanswered questions regarding environmental protection. "So far, the CDU/CSU and SPD have left an enormous gap in terms of environmental and climate protection," Greenpeace head Martin Kaiser said. "In terms of energy supply, the CDU/CSU and SPD are planning an oversized 20 gigawatts of new gas-fired power plants by the end of the decade, and there is no mention of a future switch to hydrogen."
  "If Germany is now spending a lot of money on its infrastructure, every euro invested must be sustainable and climate-friendly at the same time," Kaiser added.
• Environmental umbrella organisation DNR: DNR called for the reorganisation of the planned special infrastructure fund. "We need to think beyond the modernisation of dilapidated structures and build an infrastructure that is crisis-proof, climate-neutral and future-proof," said Kai Niebert, the head of the environmental umbrella organisation. "What is needed is a comprehensive reorganisation towards resilient structures that make us less dependent on fossil fuel imports from unreliable regions and thus create real security – not only militarily, but also economically."
  The organisation's priorities for spending include the decarbonisation of industry, the energy-efficient refurbishment of buildings, the expansion of public transport and electromobility, as well as the maintenance and development of green infrastructure. "Real security comes from a resilient energy infrastructure, an intact green infrastructure, strong international partnerships and an economically stable and cohesive society," Niebert said.

Researchers and analysts

• Christoph M. Schmidt, head of the Leibniz Institute for Economic Research (RWI): "In my opinion, no new debt would have been needed at all for a better infrastructure, for which a huge special fund has now been earmarked," said RWI head Christoph M. Schmidt. "This is because the problems in this field lie more in lengthy planning and approval procedures, shortages of skilled labour and local resistance to infrastructure measures, not in a lack of funding."
  "I don't see where the pressure to act is supposed to come from in order to critically review the expenditure structure in areas such as social welfare and climate and to consistently prioritise the increase in economic output," Schmidt argued.
• German Institute for Economic Research (DIW): The DIW calculated that the planned special fund could provide Germany with an economic boost from 2027 onwards, as investment projects must first be planned, approved, awarded and then implemented. "Economic output would increase by an average of more than two percent per year over the next ten years as a result of the additional spending," DIW wrote.