German coalition leaders brief the media after reaching an agreement between their parties on a new government. (Image: Friedrich Merz's facebook)
Since the German election took place in February, which saw the centre-right Christian Democratic Union (CDU) win the most seats, parties have been negotiating to form a new coalition government.
Earlier this week, the CDU reached a deal with the centre-left Social Democratic Party (SPD) to govern Europe’s largest economy and biggest emitter.
Led by Friedrich Merz of the CDU, the government is made up of Lars Klingbeil and Saskia Esken of the SPD, plus Markus Soeder of the CDU’s Bavarian “sister party” the Christian Social Union (CSU).
Following 45 days of negotiations, the new coalition has released a 144-page agreement, detailing their policies and plans for the coming five years of government.
The coalition is set to take over at a time of intense geopolitical uncertainty, which is reflected within the coalition agreement’s focus on a “strong government”.
The agreement places an emphasis on German politics shifting from “climate protection concerns” to “the economy and growth”, with support for “market instruments, technical solutions and reduction of bureaucracy”.
Below, Carbon Brief explains the current state of climate politics in Germany and the path ahead for its new government, including the details laid out in the new agreement.
Read more: Germany's new chancellor faces coalition challenges affecting climate goals
What is the state of climate politics in Germany?
Germany’s previous coalition government collapsed at the end of 2024 when then chancellor Olaf Scholz fired finance minister Christian Linder and announced he would call for a vote of no confidence in his government.
This followed numerous crises within the “traffic-light” coalition – made up of the SPD, the Green party and the Free Democratic Party (FDP) – which had governed since 2021.
Many of these disputes involved climate- and energy-related policies, such as the controversial Building Energy Act, which could have seen oil-and-gas heating systems banned in homes. Despite pushes from the Green party, the law was revised after the FDP argued that it would burden consumers too much with the costs of replacing heating systems.
Scholz lost a vote of confidence in December and an election was announced for 23 February.
As campaigns got underway, several climate- and energy-focused topics became key issues for voters.
Climate change has become an increasingly politically contested issue in Germany. While the CDU, SPD and Green parties all support reaching net-zero by 2045, with interim targets including a 65% cut by 2030, their approaches differ.
The FDP argues that the 2045 target should be pushed back to 2050, to line up with the wider EU target. Meanwhile, the manifesto of the far-right Alternative for Germany (AfD) party repeatedly questions the “supposed scientific consensus” on “man-made climate change”.
Beyond climate targets, home heating continued to be a major political issue in the wake of the 2023 Building Energy Act. The CDU, FDP and AfD all pledged to abolish it, while the Green party pledged to provide additional government support for households.
Several German parties pushed back in the manifestos on the EU-wide ban on the sale of new petrol and diesel cars, a policy that has been repeatedly attacked in the country over recent years.
While there is general support for renewable energy in Germany, the roles of coal and nuclear power in the country’s electricity mix remain more fraught.
The country currently has a phaseout date for coal power of 2038, a policy supported by the CDU and FDP, while the Greens and Left party (Die Linke) want to bring this forward to 2030. The AfD advocates building more coal power plants until new nuclear plants can be built.
In its manifesto, the CDU suggested that it was open to revising nuclear power in the future. However, ahead of the election, Merz conceded that it is unlikely any old reactors will be restarted.
As predicted in the polling, there was a political shift to the right during the election, with the centre-right CDU increasing its seats by 12 from the 2021 election, while the far-right AfD increased its seats by 69. Meanwhile, the SPD lost 86 seats and the Green party lost 33.
This meant the CDU emerged from February’s election with the largest number of seats, as shown in the below chart.
Change in votes for right-leaning parties (blue) and left-leaning parties (red) between in 2021 German election and the 2025 election. Source: The Federal Returning Officer.
While the AfD won the second most seats, the mainstream German parties have long agreed to a “firewall” against far-right groups, meaning they refused to form a coalition with the AfD.
Over the following months, Merz worked to build a coalition government amidst “intense pressure to put an end to Germany’s political limbo”, according to BBC News.
One key development during this period was that the German parliament adopted a constitutional reform to allow the country to take up €500bn in new debt to finance defence, infrastructure and climate investments.
The reform – which reached a two-thirds majority during a vote in the Bundestag on 18 March – allows the government to borrow money through the so-called “debt brake”.
According to the German climate website Clean Energy Wire (CLEW), the vote “marked a crucial step on the path towards a new coalition government” under chancellor Merz, whose CDU/CSU alliance proposed the reform together with the SPD.
SPD’s Klingbeil called the vote a “historic decision” that marked a “positive new beginning” for both Germany and Europe.
On the back of this success, Merz unveiled his coalition deal with the SPD on 9 April, which targets plans to revive growth in Germany.
How is Germany progressing on its climate targets?
Germany is currently expected to miss its 2030 climate targets, despite progress in the energy sector.
In February, the independent Council of Experts on Climate Change’s most recent assessment of the country’s climate performance found that Germany will not meet its goal to cut 65% of emissions by 2030 compared to 1990.
The government advisors said this was mostly due to the transport and construction sectors.
Greenhouse gas emissions in Germany fell 3% in 2024, to 656m tonnes of carbon dioxide (MtCO2), according to thinktank Agora Energiewende. This brings emissions 48% lower than in 1990.
Of this, around 80% of the reduction came from the energy sector. In contrast, industrial emissions rose by 3MtCO2, despite the economic downturn seen in recent years.
To reach its 2030 emissions reduction target, Germany will need to reduce emissions across all sectors, but particularly transport and buildings as shown in the chart below.
Emissions from key German sectors shown from 2019-2024, alongside the reductions needed to meet its 2030 target. Source: Agora Energiewende.
According to Agora Energiewende, uncertainty among households and businesses is leading to a reluctance to invest in both fossil-fuel and climate-neutral technologies. As such, sales of heat pumps and new registrations of electric cars declined by 44% and 26%, respectively, in 2024 from 2023 levels, despite lower electricity costs.
Germany now generates 57% of its electricity from low-carbon sources, according to thinktank Ember. Of this, 43% came from wind and solar generation – which is well above the EU average of 29%.
Fossil fuels generated 43% of the country’s electricity in 2024. Coal power has been in long-term decline, falling to 22% last year from 52% in 2000.
Germany’s last nuclear plant shut in April 2023, reported CLEW. Despite suggestions this could lead to a supply risk, price hikes or increased coal power, these have not materialised.
As part of Germany’s “net-zero by 2045” target, the country is aiming for 75% of its electricity to come from renewables by 2030.
Decarbonisation of the transport sector is expected to be a key pillar of Germany’s Energiewende policy, together with the transition to low-carbon power generation.
However, the sector has long been considered the “problem child” of its transition, with the country’s Council of Experts on Climate Change repeatedly warning that Germany’s transport sector is exceeding its annual greenhouse gas emissions limit.
What has the coalition pledged on climate and energy?
Carbon credits
The coalition agreement published on 9 April includes a commitment to both German and wider European climate targets, continuing the CDU/CSU and SPD’s manifesto support for net-zero by 2045.
Support for the EU’s “90% emissions reduction by 2040” target, however, has been included on the basis that CO2 reduction “credits” traded via other countries can be counted. The coalition intends to use such reductions to meet 3% of Germany’s own reduction goal.
This use of foreign carbon credits has been met with some criticism, with Julia Metz, director of industry-focused German thinktank Agora Industry, saying in a statement:
“The incoming government’s support for an EU 90% emission reduction target for 2040 sends a strong signal at a time of geopolitical turmoil that Germany is committed to climate neutrality.
“However, the proposal to allow governments to “offset” emissions by buying international credits – rather than reducing them at home – risks undermining the target’s credibility and would mark a major shift in the EU’s current approach to climate action.”
Additionally, the agreement places emphasis on the importance of “effective” carbon-leakage protection, a reference to the carbon border adjustment mechanism (CBAM), which will add to Germany’s “industrial value creation”.
Overall, the agreement did not contain any major surprises with regard to climate and energy policy, according to CLEW.
But some key points of controversy were omitted, with the incoming government placing emphasis on economic growth and “technological optimism” over climate protection, as noted by Frankfurter Rundschau in its coverage.
Energy
The new coalition is continuing Germany’s energy transition without major adjustments to the plans and targets announced by previous governments.
The agreement includes plans to stick to the previously agreed coal phaseout date of 2038 at the latest. This will continue the decline of the fossil fuel already seen over the past 25 years, as shown in the chart below.
Electricity generation in terawatt hours (TWh) from 2000-2024 in Germany. Source: Ember.
It states that renewable power generators should be made ready to fully finance themselves on the market, suggesting a shift away from subsidy support for wind and solar.
Similarly, the expansion of the energy storage sector should be achieved through a “greater use of market instruments”.
However, the agreement does note that support should be made more conducive to stabilising the power system by integrating storage units and feed-in mechanisms, notes CLEW. Additionally, private households should get easier access to solar.
From 2032, the spacial needs for wind power will be re-evaluated and communities further integrated into the planning process. This follows tensions around onshore wind in Germany, with local resistance driving a “drastic slowdown” in the country.
Up to 20GW of new gas-fired backup power plants should be built, supported through auctions, according to the agreement. “Technology-open and market-oriented” capacity mechanism auctions will support bioenergy, combined-heat-and-power plants, storage units and flexibility options, it adds.
The coalition agreement sees CSU leader Markus Söder “abandon his demands for a return to nuclear energy in Germany”, according to Der Tagesspiegel. Speaking in Munich following the release of the treaty, Söder said “nuclear energy could no longer be made possible”.
Beyond this, the agreement includes plans to expand the hydrogen economy in Germany, as well as build out carbon capture and storage (CCS) both for industry and gas-fired power plants. Storage of CO2 will be developed in the North Sea continent shelf, as well as potential onshore sites.
Finally, Handelsblatt reports that the German economy and climate action ministry “is preparing” for a possible “US demand”, under the terms of a possible US-brokered peace deal between Russia and Ukraine, which could require the country to bring the Nord Stream 1 and 2 gas pipelines in the Baltic Sea back into operation.
Industry
The coalition agreement includes continued support for industry and business, as the newly formed government looks to protect the sectors amid wider international trade tensions driven by the implementation of tariffs by the US.
This includes plans to introduce a “Germany fund” that will be worth at least €10bn of public money for investments in the country, according to CLEW.
Energy prices for companies and households will be reduced by at least five euro cents per kilowatt hour, electricity tax will be cut to the European minimum and grid fees and levies reduced.
Energy-intensive companies that cannot adapt their operations will also have access to a special industry power price.
Reacting to the coalition agreement, Prof Ottmar Edenhofer, director of thinktank Potsdam Institute for Climate Impact Research, welcomed the continued protection that industry will receive due to the support against carbon leakage through CBAM, adding:
“It is not only necessary for ensuring European industry is not disadvantaged by international competition, but also to strengthen international climate cooperation – this applies despite the US’s climate-policy breakdown. The CBAM, as has already been demonstrated in the run-up to its implementation, also incentivises countries outside the EU to implement carbon pricing.”
Beyond these elements, the agreement includes a commitment to create lead markets for climate-friendly products, either through quotas for low-emissions steel production or public procurement regulations, according to CLEW.
The incoming government will continue funding programmes for the decarbonisation of industry. It highlights both the extraction of critical raw materials and the steel industry as being of strategic importance for the country.
Transport
The agreement includes a number of transport-related policies, including a “clear commitment” to the car industry based on “technology neutrality”, notes CLEW.
It welcomes the electrification of vehicle fleets, but stops short of supporting legal quotas. The coalition has instead said it will “support e-mobility using purchase incentives”, alongside tax incentives such as discounts for company cars and support for low-income households looking to switch.
This will include purchase incentives for electric cars, including plug-in hybrids, and cars fitted with range extenders, Reuters reported.
The agreement commits to more support for the rollout of EV charging infrastructure, alongside “hydrogen charging” networks for trucks.
Additionally, despite previous claims from the CDU/CSU that they would remove the 2035 phaseout target for internal combustion engine cars, no reversal is included within the deal.
The introduction of speed limits – a particularly contentious subject in Germany, despite studies suggesting a 130kph speed limit could cut carbon and bring in nearly €1bn in benefits – has also not been mentioned in the agreement.
Beyond this, it states that the coalition will increase investment in rail infrastructure, speed up rail electrification and support walking and cycling.
It will also reverse the aviation tax increase. The coalition notes that they will ensure that European airlines are not disadvantaged in the sustainable aviation (SAF) quota. The ReFuelEU Aviation Regulation requires airlines to use 2% of SAF in 2025 and increase this to 70% by 2050.
Other
Following the tensions around the 2023 Building Energy Act, the coalition has included a plan to introduce an act that is “open to technology, more flexible and simpler”.
This will help modernise the country’s heating supply, it claims, with “achievable CO2 avoidance” becoming the “central control parameter”.
Communal heat planning regulations will be simplified, while renovation and heating systems will continue to be subsided, it says.
The agreement includes a commitment to implementing the climate adaptation strategy, which sets 33 goals and 180 measures to better adapt to the impacts of climate change.
It will put financing for climate adaptation “on solid footing” with federal states, it adds.
Additionally, the agreement includes support for the EU Emissions Trading System (EU ETS), the second iteration of which is set to come into force in 2027. The agriculture sector will not be made to be subject to the ETS regulation.
This article was originally published on Carbon Brief under the Creative Commons BY NC ND licence. Read the original article.
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