Germany’s budding coalition agrees electricity price cuts, e-car subsidies
The conservative alliance (CDU/CSU) and Social Democrats have cleared the first hurdle for forming a new government by reaching preliminary agreements on future policies, including a commitment to climate targets, electricity price cuts, and a broad continuation of the country’s landmark energy transition. But environmentalists said the plan lacked ambition and details when it came to emission reductions.
“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,” the two parties said in a paper detailing the results of exploratory talks, which will now form the basis for the start of formal coalition negotiations. Likely next chancellor Friedrich Merz has said he wants to reach a final coalition agreement by Easter (mid-April).
Both parties also agreed to continue the rollout of renewables, grid modernisation and the expansion of hydropower, geothermal energy and energy storage technologies. They also said they wanted to support the decarbonisation of industry by creating lead markets for climate-neutral products, which could involve quotas for climate neutral steel.
“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,” the document said, which also announced new purchase incentives for electric cars.
[This factsheet summarises the paper’s energy and climate agreements.]
The paper does not mention a restart of some of Germany’s decommissioned nuclear power stations, which was an occasional election campaign topic but considered extremely unlikely to be addressed by most experts. However, the parties agreed to strengthen research into nuclear fusion to “build the world's first fusion reactor in Germany.”
Focus on energy costs and competitiveness
In a similar vein to recent policy shifts at the EU level, Germany’s prospective new government put a large emphasis on competitiveness but provided little detail on future climate policies.
“Our aim is to achieve permanently low, predictable and internationally competitive energy costs,” read the agreement, which also promised to reconcile climate protection, social equity and economic growth in a “pragmatic and unbureaucratic way.”
Following their corresponding election campaign promises, the parties agreed to lower electricity prices for households and companies by “at least five cents” per kilowatt-hour (kWh). Proposals include reducing the electricity tax to the EU minimum of 0.05 cents/kWh for companies and 0.1 cents/kWh for households, and halving transmission grid fees which are currently 6.65 cents/kWh. They also said they would extend CO2 price compensation for industry.
The Conservatives and Social Democrats also agreed to incentivise the construction of 20 gigawatts (GW) of gas-fired power plant capacity by 2030 to back up intermittent renewables, while the outgoing government had been aiming for 12.5 GW by that date. The aspiring government wants to use those plants not only during supply bottlenecks, but to also stabilise prices.
NGOs criticise agreements as climate policy “black box”
Industry groups welcomed the parties’ intention to lower power prices, but environmental groups criticised the paper for remaining too vague on climate policies. Media reported that Merz didn’t mention climate issues once during his presentation of the paper, underlining the widespread impression that the topic is not very close to his heart.
“The CDU/CSU and SPD have so far left an enormous gap in terms of environmental and climate protection,” said Greenpeace Germany head Martin Kaiser. He warned that the parties’ vague commitment to carbon capture and storage (CCS) and plans for “oversized” gas-fired backup capacity constitutes “a life insurance policy for climate-damaging fossil fuel business models.” Green mobility lobby group VCD said “the current proposals resemble a black box.”
A company alliance in favour of climate action (Stiftung Klimawirtschaft), which includes discounter Aldi, bank BNP Paribas, and steelmaker Salzgitter, called on the prospective coalition partners to be ambitious on climate in order to preserve long-term competitiveness, wealth, and jobs.
“As the voice of the economy, we are calling on the next federal government to draw up a clear roadmap for meeting the climate targets,” the group said in a public appeal.
"Failure is not an option"
The Greens were also critical of the exploratory talk results. Instead of solving structural problems, the future coalition wants to throw money at everything as in previous iterations of the same coalition, said party leader Franziska Brantner, according to a report by newswire dpa. “That is poison for our country.”
Merz needs the Greens’ support for his massive infrastructure plans, which were already revealed last week. He told Deutschlandfunk radio that there would be extensive talks with the parliamentary group and party leadership this week. The Green party leadership said they would not support the current debt reform proposal, signalling they expect major concessions in upcoming negotiations.
The Conservatives and Social Democrats have proposed an overhaul of state debt rules to make hundreds of billions of euros available for defence and infrastructure investments, but their agreement needs constitutional changes, meaning it requires a two-thirds majority in parliament.
In a nod to the Greens’ demands, Merz said the planned special fund for infrastructure would also be used to pay for climate protection projects. “And of course we will also include climate protection measures in the list of infrastructure projects – which will then have to be enshrined in law,” he said.
Merz reaffirmed his determination to form a government with the SPD, following intense international pressure to enable rapid decision-making in the face of the geopolitical upheaval caused by the U.S. “Failure is not really an option for us,” he told Deutschlandfunk radio. “And that is why we have mutually agreed to rule out the possibility that the coalition we are planning could fail again on the way there.”
