Germany

Germany will not achieve its national targets for 2020 and 2030 with currently implemented policies.

In 2018, Germany’s emissions (excl. LULUCF) were 30.8% below 1990 levels or 866 MtCO₂e in total. That is 41 MtCO₂e or 4.5% less than in 2017 and the first significant reduction after four years of stagnation. However, the Federal Environment Agency indicated that the drop in emissions is largely due to unusual weather conditions in 2018 and a declining consumption of fossil fuels (Umweltbundesamt, 2019a). Our analysis shows that absolute emission levels resulting from current policy trajectories will be at 802-836 MtCO₂e in 2020, which is a 33-36% change below 1990 excl. LULUCF, missing the 40% target.

For our analysis we used two scenarios: one from the projection report (“Projektionsbericht”) published by the Federal Environment Agency in September 2019, which includes all measures that were adopted by 31 August 2018 (German Federal Environment Agency, 2019). This means measures proposed in the Climate and Energy Package of September 2019 are not yet included in the projections. The scenario is also the basis for the “With Existing Measures” or WEM Scenario published by the European Environment Agency.

The other more ambitious scenario also builds on the projection report but includes updated emissions for the energy sector for 2019 as reported by the Federal Association of the Energy and Water Industry (BDEW). The BDEW emission estimates for the energy sector in 2019 are at 263 MtCO₂e and therefore 35 MtCO₂e lower than in the projection report (BDEW, 2019). As a result, the discrepancy between these two scenarios reflects what would be possible if the energy sector were to continue along that path. Both scenarios lead to emissions reductions in 2030 of between 41% (projection report scenario) and 43% (BDEW scenario) below 1990 levels, neither of them sufficient to meet Germany’s 55% reduction target.

The following gives a brief overview of the more general recent developments in German climate policy, while the respective sectoral policies are described in more detail in the sectoral sections below.

In September 2019 the “Klimakabinett”, a committee including chancellor Angela Merkel as well as the respective ministers of the ministries of the Environment, Agriculture, Finance, Economy, Building and Transport agreed on a Climate and Energy Package for 2030 (German Government, 2019b). The first chamber of the parliament (Bundestag) has adopted the package as national climate law and associated regulations in November 2019 (German Government, 2019a), this has been partly confirmed by the second chamber (Bundesrat). However, it voted unanimously to convene a mediation committee on the tax laws included in the package, e.g. the reduction of VAT for train tickets (Süddeutsche Zeitung, 2019). German environmental organisations and the opposition heavily criticised the package as disappointing and not ambitious enough (Enkhardt, 2019).

The package distributes the 55% reduction target by 2030 to sectors and gives responsibility to sectoral ministries to implement it. The Building and Transport ministries would also be responsible for paying the fines due under the EU Effort Sharing Regulation, if these targets were not met. Such a penalty for Germany could be in the order of €60 bn Euro if no additional measures are implemented (Agora Energiewende and Agora Verkehrswende, 2018; Höhne and Fekete, 2019).

The law includes binding sectoral reduction targets and the appointment of an expert commission that verifies the annually calculated emissions projections of the Federal Environment Agency, including its sector allocation. If the expert commission finds that a sector is missing its target, the responsible ministry has to submit an emergency programme within three months.

A calculation of the actual mitigation effects of the Climate and Energy Package was included in its first draft - but then removed. Quantifications by the ministries as to the quantity of greenhouse gas emissions that can be saved by the proposed measures are expected for March 2020. In the following we evaluate the impact of a few individual measures, but a quantification of the impact of the full package was not possible.

According to the German government targets, the energy sector will have to limit its GHG emissions to 175-183 MtCO₂e by 2030. This is a reduction of 61-62 % below 1990. The energy and climate package states that by 2050, energy supply must be “almost” completely decarbonised. On a positive note, latest projections suggest that the energy sector has already reached its target for 2020 (280 MtCO₂e) in 2019 (263 MtCO₂e) (BDEW, 2019). However, the only gradual coal-phase out by 2038 and difficulties with the expansion of renewable energy capacity pose a risk to Germany’s ability to reach its long-term target.

Coal phase-out

Although CO₂ emissions from lignite and hard coal have declined in recent years, about one third of German CO2 emissions still come from power and heat generation from coal-fired power plants (2018: 31.6%) (Agora Energiewende, 2019).

In January 2019, a government-appointed, multi-stakeholder “coal commission” developed a compromise for phasing out coal-fired power generation in Germany (Kommission „Wachstum Strukturwandel und Beschäftigung“, 2019). The commission proposed phasing out coal by 2038 at the latest and to shut down 13 GW of the currently 43 GW of installed coal capacity by 2022, an additional 13 GW by 2030 and phasing out all production by 2038, with an option of bringing this date forward to 2035. The government promised to enshrine the coal exit roadmap into law by November 2019.

A copy of the ministerial draft of the coal exit law from the Ministry of Economic Affairs and Energy, leaked in early November, indicates the government is planning exceptions for the ban on building new coal-fired power plants. The draft text states the ban does not apply to plants for which "an immission protection permit had already been granted by the time the law enters into force". This means, for example, that the controversial 1,100 MW Datteln 4 coal-fired power plant could still go online in 2020 (Flauger et al., 2019). However, the law has yet to be agreed upon by the Cabinet before being sent to parliament for the regular legislative process. The exact timeline remains unclear, as a spokesperson of the Environment Ministry told media there were “many points that still needed to be debated intensively” (dpa, 2019).

It can be positively noted that the coal compromise was reached with broad societal consensus. However, the schedule is not fast enough to be compatible with 1.5°C. In Paris Agreement compatible pathways for OECD countries, coal power generation would need to be reduced by 86% by 2030 below 2010 levels, leading to a phase-out by 2031 (Yanguas Parra et al., 2019).

Projections show that coal-fired power plants operating as planned under the German coal compromise would emit 2 GtCO₂e by 2038 (Agora Energiewende, 2019). This is roughly half of Germany’s carbon budget under the CAT’s 1.5°C Paris compatible pathway. Further, the compromise was found only by compensating the affected regions (€40 bn EUR) and the affected companies operating the coal-fired power plants (planned are €180 m EUR per GW resulting in the order of an additional €5-10 bn EUR) (Agora Energiewende, 2019; Bundesministerium für Wirtschaft und Energie, 2019). Currently 20,000 people work directly for the coal-fired power plants, and 14,000 of those workers will be retired by 2038.

Renewables

The German renewables sector is in severe crisis. On the one hand, the share of renewables in the electricity sector rose from 36% in 2017 to 37.8% in 2018 (German Federal Environment Agency, 2019). But capacity additions for all major technologies have since declined.

After the end of the solar boom from 2010-2012 that saw more than 7.5 GW of additions per year, installation rates fell to 1 GW in 2014 and since then have been slightly increasing (AGEE, 2019). At that time 100,000 jobs were lost (Bundesministerium für Wirtschaft und Energie, 2018).

Offshore wind peaked at 2 GW in 2015 and is at 1.2 GW in 2019; onshore wind peaked at 5 GW in 2017 and has almost come to a standstill in 2019 (287 MW in H1 2019 compared to 1,626 MW in H1 2018) (Fraunhofer ISE, 2019; Wind Europe, 2019). A change in the auctioning system led to a delay in construction of auctioned amounts. As a consequence, wind companies are in serious economic trouble, losing 20,000 jobs from 2016 to 2017 with a grim outlook (Bundesministerium für Wirtschaft und Energie, 2018). Around 3,000 jobs alone were lost by wind giant Enercon in November 2019 (Balser and Bauchmüller, 2019).

The German government aims to raise the share of electricity generated from renewable energy to 65% of gross electricity consumption by 2030. German Environment Agency projections, however, show that a share of only 51.7% will be reached under current policies by 2030 (German Federal Environment Agency, 2019). This projection does not even take into account the recent drop in new wind power installations. To implement the 65% target, more wind capacity additions need to be auctioned, the approval processes need to be accelerated, and the distance regulations for wind turbines need to be loosened.

The installation targets in the energy and climate package imply average yearly capacity additions of 4.8 GW for solar PV and 1.3-1.7 GW for onshore wind. The plan increased the expansion targets for 2030 for offshore wind to 20 GW, onshore wind to 67-71 GW and solar PV to 98 GW. The support cap of 52 GW for PV will be removed completely. Minimum distance regulations to settlements for wind turbines, currently under discussion, would drastically reduce the available space for wind power (by 20-50%) and will make it difficult to reach the 1.3-1.7 GW for onshore wind: in the worst case it will allow no expansion at all (Umweltbundesamt, 2019b).

The installation targets of the energy and climate package are clearly not sufficient to achieve the 65% renewable energy target. Different studies estimate that it is necessary to increase onshore wind installations to at least 4.4 GW and solar PV to at least 4.3 GW a year (Oei et al., 2019)

Industry emissions declined by 30% from 1990 to 2008 and have been stable since. The main instrument for emissions reductions, the EU ETS, has not led to reductions due to the low CO₂ price.

The energy and climate package does not add any significant new measures for emission reductions in this sector. It proposes streamlining the existing support programmes into a "one-stop-shop" and promises additional support from low carbon technologies in areas where reductions are difficult - without any detail of the level of available funding. Such a package will not be enough to reverse the trend of stable emissions to a reduction by further 20% as declared in the government’s Climate Plan.

Passenger vehicles

The German government has set a goal of seven to ten million electric vehicles in its fleet by 2030. This compares to 220,000 by November 2019 with currently only 3% of newly sold cars being electric (2018: 2%) (ACEA, 2019; VDA, 2019).

To reach this target the German government plans to prolong tax credits for company cars with batteries or plug-in-hybrid vehicles until 2030 and to reduce taxes for pure electric company cars up to a price of €40,000 EUR from 0.5% to 0.25% (German Government, 2019b). During a recent meeting, the government agreed with the German car industry to increase the financial incentive for newly-purchased battery electric vehicles (BEVs) from €4,000 EUR to €6,000 EUR. It was also expanded to cover vehicles above €40,000 EUR, which were previously not eligible.

While this is a significant increase, it is still well below other countries such as Norway, where a purchase tax exemption can provide incentives as high as €10,000 EUR, depending on comparable fossil fuel car weight and emissions (Norsk elbilforening, 2019). In addition, the premium may lead to hidden price increases as it is covered half by the producers themselves. Small start-ups cannot cross-subsidise this premium from other business and may need to essentially raise the price of the EVs, potentially cutting the effective premium in half.

The Climate and Energy Package also stipulates that the number of public charging points for electric vehicles should increase to one million by 2030. With 20,560 chargers by August 2019, the Government aims to have 50,000 public charging stations in 2020 (German Government, 2019b). All gas stations will be required to have charging stations and if the set goal cannot be achieved through market mechanisms, the government is considering further regulatory measures. On a per capita level, this means 604 chargers/million people, still significantly lower than Norway today, where there are 2,364 public chargers/million (IEA, 2019).

Initial results from our own modelling¹ suggest that the current support of €6,000 EUR per vehicle, together with the rest of the policy package already in place in Germany, would lead to an uptake of EVs of between 4.8 million – 5 million by 2030, well below the target of 7– 10 million (approx 30% - 50%) by 2030. This would correspond to a share of 30% of EVs in the cars sold in 2030, which is not in line with the Paris Agreement compatible target of the last fossil fuel car sold by 2035 and is in stark contrast to Norway’s announcement of aiming to have all new cars be zero-emission vehicles by 2025.

1 | We compare the support provided for EVs with that in Norway and the corresponding development in the shares of EVs (De Villafranca Casas et al., 2018).

Public transport

The German government plans to increase its budget for the improvement and expansion of the public transport system to €1 bn EUR per year from 2021 and €2 bn EUR from 2025. Deutsche Bahn, the national train company, and the government further plan to invest €86 bn EUR into the rail network by 2030. Additional measures include the reduction of the value added tax from 19% to 7% on long-distance tickets from January 2020 and the support of model projects, including an annual public transport ticket for € 365 EUR (German Government, 2019b). The impact of these measures is difficult to predict.

The overall Climate and Energy Package also includes the increase of the tax credit for long distance travel to work (‘Pendlerpauschale’). It was introduced to dampen the burden of the CO2 price for commuters, but in effect makes long distance commuting more attractive, i.e. leads to increased emissions.

Carbon price

As of 2021 emissions trading will be introduced on transport fuels. Certificates will be distributed for a fixed price of €10 EUR/tCO2 in 2021 rising to €35 EUR/tCO₂ in 2025. After that new allowances will be auctioned in a corridor of €35 EUR to €60 EUR/tCO₂. If more allowances are needed than available under the target pathway, additional allowances can be purchased from other EU member states.

The impact of this new system is very difficult to predict. An initial price of €10 EUR/tCO₂ will only have limited effect, as it increases fuel prices only by 3 Eurocents a litre, i.e. around 2%. If demand supersedes the amount that is provided at a fixed price and allowances need to be purchased from member states, this could see prices reaching relatively high levels. All proceeds from the pricing system will be re-invested into climate protection or returned to citizens.

Aviation

To avoid airlines from offering low ticket prices (“dumping prices”), the Climate and Energy Package stipulates that tickets must not be cheaper than the costs of taxes, surcharges and other fees combined and the German government plans to increase the aviation levy by April 2020 and almost double taxes on short-haul flights. For flights up to 2,500 km the levy will be increased from €7.50 EUR to €13.03 EUR, from 2,500 – 6,000 km from €23.43 EUR to €33.01 EUR and for flights above 6,000 km from €42.18 to €59.43 EUR (German Federal Ministry of Finance, 2019)

The buildings sector is responsible for 14% of Germany's total emissions. Emissions have declined by 23% over the last ten years and still need to reduce further to meet the sectoral target

CO₂ price

As of 2021 emissions trading will be introduced on fuels in the buildings sector. Certificates are distributed for a fixed price of €10 EUR/tCO₂ in 2021 rising to €35 EUR/tCO₂ in 2025. After that, new allowances will be auctioned in a corridor of €35 EUR to €60 EUR/tCO₂ (German Government, 2019b). If more allowances are needed than available under the target pathway, additional allowances can be purchased from other EU member states. All proceeds from the pricing system will be re-invested into climate protection or returned to citizens. To ensure that the costs of climate protection do not put a burden on people with low incomes, housing allowances are planned to increase by ten percent from January 2021 onwards (German Government, 2019b).

The impact of this new system is very difficult to predict. An initial price of €10 EUR/tCO₂ will only have limited effect, as it increases the price of gas for heating by around 5%. In the long term, prices could reach quite high levels, if demand superseded the amount that is provided at a fixed price, but again, this is difficult to predict.

Building renovations

Germany has a long tradition in providing low interest loans for renovation of buildings and support of renewable heating systems.

As a new measure of the climate and energy package, energy-efficient retrofits of buildings used by the owner become tax-deductible by 2020. In addition, a scrap premium of 40% is paid on exchanging an oil heating system by a new one based on renewables or gas with a share of renewables.

According to the package, new oil heating systems will be forbidden as of 2026, but existing systems can still be operated after this date. This measure does not appear ambitious, as for example Netherlands already today requires that new buildings cannot use fossil fuel heating systems, not even gas (EnergyPost, 2017).

Since 1995 emissions from the agriculture sector have remained almost unchanged. The sectoral target for the agriculture sector is to emit no more than 58-61 MtCO₂e/year by 2030. Compared to 2017, emissions would have to be reduced by 16-21%, or by 12.1- 15.1 MtCO₂e by 2030 (Umweltbundesamt, 2019c). With existing measures, the level is expected to stand at 67 MtCO₂e in 2030, which is higher than in 2017 (66 MtCO₂e) and leading to a gap of approximately 6-9 MtCO₂e/year.

In April 2019, the Federal Ministry of Food and Agriculture developed a ten-point plan to decrease emissions in the agriculture sector, including the calculation of the yearly mitigation potential (12.5 – 30.1 MtCO₂e/year in total) (Bundesministerium für Ernährung und Landwirtschaft, 2019). However, only the first five points relate to agriculture, while the others are related to LULUCF. The mitigation potential of the agriculture measures only equates to 5.5 – 13.6 MtCO₂e/year, which may not even be enough to reach the minimum target.

Overall, the plan proposes the expansion of organic farming (20% of all farming by 2030) through increased financial support and emission reductions from livestock farming in line with animal protection. Further, nitrogen surpluses are supposed to be decreased with new regulations for the use of fertilisers, and a national strategy for the avoidance of food waste will be developed. Moor and peatlands will receive better protection and overall, the capacity of soils as carbon sinks will be better exploited, e.g. through reducing the use of peat in growing media.

Forests cover approximately 11.4 million hectares in Germany, which equates to one third of Germany's national territory. The LULUCF sector has been a net sink of CO₂ emissions. However, in 2017, the removal of CO₂e has more than halved compared to 1990 (15 MtCO₂e compared to 31 MtCO₂e) while forests are increasingly suffering from the impacts of climate change. The Forest Strategy 2020, which was adopted in 2011, aims to coordinate the ecological, economic and social demands on forests in Germany. One objective of the Strategy is to utilise forest management and wood use to contribute to reducing CO₂ emissions and conserve German forests to enhance their resilience (German Federal Ministry of Food Agriculture and Consumer Protection, 2011).

Measures proposed in the Climate and Energy Package include increasing efforts for reforestation and the adaptation of forests to changing weather patterns, increasing the capacity of soils as carbon sinks and a better protection of moor and wetlands, in a general effort to make carbon sinks more resilient to extreme weather events (German Government, 2019b).

In 1990 the German waste sector still emitted 38 MtCO₂e (3% of total emissions). By 2017, emissions were at 10 MtCO₂e - a decrease of 74% and contributing only about 1% of total emissions. This was achieved mainly by ending the disposal of untreated residential waste and the increased utilisation of energy and materials in waste (Umweltbundesamt, 2017). Since 2005 landfilling of biodegradable waste is prohibited in Germany.

The Climate and Energy Package proposes three additional measures for the waste sector: 1) continued support of small landfill aeration projects, 2) additional support for large landfill aeration projects and 3) optimised landfill gas capture (German Government, 2019b).