October 10, 2021

Climate policy is at the center of German coalition talks

topic:	Election
located:	Germany
editor:	Abby Klinkenberg

The Green Party was victorious in September’s German federal election. No, they did not win an outright majority, nor did they even earn the most votes - however, backed by 14.8 percent of the German public, the third-place Greens have a chance to tilt German climate policy by deciding whether to form a coalition with the center-left Socialist Democratic Party (SPD) or the conservative Christian Democratic Party (CDU). 

However, there is one hurdle to a green honeymoon: the liberal, free-market Free Democratic Party (FPD), which earned 11.5 percent of the vote, must also participate in any viable coalition talks. There’s no doubt that the FPD, which was ranked as having the ‘worst’ climate policies of the five ‘democratic’ parties that stood for election on 26 September, will throw its weight around - potentially compromising the path towards a sustainable future.

All eyes are on the Greens and the FPD as they strive to hammer their divergent climate policies into a coherent framework to enter into a governing coalition, which will most likely occur with the SPD. Three main bones of contention that are sure to feature prominently in their talks merit a deeper dive: renewable energy, automotive industry policy, and carbon pricing. 

Renewable Energy: Under current leadership, Germany plans to phase out coal entirely by 2038 as part of its goal to reach carbon neutrality by 2045. These targets are already ambitious: to achieve them, German think tanks agree that existing climate efforts must be tripled. 

The Green Party is not satisfied with these aspirations and has proposed to move forward Germany’s coal phase-out by eight years, to 2030, as part of a plan to arrive at carbon neutrality five years earlier, in 2040. They aim to do so by pursuing a ‘green’ hydrogen policy, investing heavily in renewables, and stepping up regulatory efforts. Additionally, the Greens have pledged to halt the advance of the Nord Stream 2 natural gas pipeline from Russia, which they see as just another massive investment in fossil fuels couched in the language of “bridging technologies.” 

The FPD, on the other hand, has a resolutely pro-market stance and has thus far resisted any commitment to setting a precise date for either Germany’s exit from coal or carbon neutrality, presumably (but not necessarily) aligning them with the current schedule set for 2038 and 2045, respectively. The party is “reluctant to tackle climate change through regulatory law or state subsidies on green technologies.” The FPD is also fond of pursuing a ‘blue’ hydrogen policy that relies on natural gas and methane extraction and supports environmental bridging technologies, though remains skeptical of Nord Stream 2.

Automotive industry policy: The Green party aims to tackle the issue of reducing emissions in the transport sector by means of prohibitive legislation, namely through banning the registration of emissions-producing vehicles after 2030. Similarly, the party advocates placing a 130 kph speed limit on the Autobahn (which currently has no speed limits in many areas), a policy that would have positive environmental externalities. The Greens also resist additional investments in road infrastructure. 

The FPD, on the other hand, is opposed to such regulations - both in the automotive industry and on German roads - as its liberal, free-market orientation suggests. On this point, in particular, it is difficult to imagine the two parties coming to an agreement. 

Carbon pricing: Germany participates in the EU’s Emissions Trading System, which has been active since 2005 and applies to over 11,000 companies in the energy sector, energy-intensive industries and commercial aviation within Europe. In August 2021, Germany extended its own carbon pricing system to include the transport and building sectors. Currently, Germany sets the price of carbon emissions at €25 per ton, a figure that is set to rise to €55 in 2025. 

The Green Party advocates a steeper rise in carbon taxation, proposing to ask €60 per ton of emitted carbon from polluting companies as of 2023. For the Greens, this is simply one of many - and by no means the only - method pursued to address emissions levels.

On the other hand, carbon pricing resides fundamentally (and almost exclusively) at the heart of the FPD’s climate policy. It aims to extend the German national and EU free-market emissions trading mechanisms to all sectors of the economy. Such a universal extension is opposed by the Green Party, but its willingness to engage with existing schemes suggests that this area is ripe for negotiation: “If [the Greens and FPD] agree on CO2 pricing... it could accelerate the country's coal phaseout and make it easier to achieve climate neutrality.”

As the Green Party and the FPD work towards forging Germany’s first-ever three-party governing coalition, they will have to navigate the choppy (and polluted) waters of environmental policy in order to chart a common course towards a carbon-neutral future. Ultimately, it is expected to take until Christmas for the Green Party, the FPD and either the SPD or CDU to form a new governing coalition. Until then, climate policy negotiations will be ongoing. 

Photo by Maurits Bausenhart

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