Germany

Overall rating
Insufficient
Policies & action
Almost Sufficient
< 2°C World
Domestic target
Almost Sufficient
< 2°C World
Fair share target
Insufficient
< 3°C World
Cimate finance
Insufficient
Net zero target

year

2045

Comprehensiveness evaluated as

Average
Land use & forestry

impact on overall emissions is

Not assessed
Policies & action
Almost Sufficient

We rate Germany’s policies and actions until 2030 “Almost Sufficient”. We project that implemented and announced policies and actions will lead to emissions reductions of between 54-57% below 1990 levels by 2030 excl. LULUCF and considering the additional impact of the COVID-19 pandemic. This falls short of Germany’s 2030 target of at least a 65% reduction below 1990 levels.

In June 2021, Germany has adopted a new climate law with updated national targets, and a climate and energy package together with a EUR 8bn emergency programme. In its climate and energy package the German government agreed on raising the tender volume for wind power from 3GW per year to 4GW and for solar PV from 4GW to 6GW – still far behind the historical highs of 7GW and 8GW, respectively. In 2020, emissions from natural gas significantly increased and about 16% of total German emissions still came from power and accompanied heat generation from coal-fired power plants. While Germany has agreed on a coal phase-out by 2038 and the first rounds of phase-out tendering have been held in 2020 and 2021, the schedule is not fast enough to be compatible with Germany’s new climate targets, let alone a 1.5°C pathway.

While emissions in the transport sector decreased in 2020 due to the COVID-19 pandemic, and the share of alternatively powered vehicles in new registrations is continuously growing, the transport sector still shows the largest gap (40 – 43 MtO2e/year) between projected emission levels and the 2030 sectoral government target. For the industry sector, the government has taken important steps, including a EUR 2bn financial aid scheme supporting research on innovative technologies for decarbonising heavy industry and a strategy for climate-friendly steel production. While these are steps in the right direction, they are unlikely to be enough to reach full decarbonisation of the sector.

To move onto a 1.5°C pathway Germany would need to phase out coal by 2030, increase its renewable energy target for the electricity sector to around 90% or more by 2030, improve the numbers of new electric vehicle sales to at least 95% of the market by 2030, and significantly reduce the emissions intensity of Germany’s heavy industry.

Further information on how the CAT rates countries (against modelled pathways and fair share) can be found here.

Policy overview

Germany has met its 2020 target only with the additional impact of the COVID-19 pandemic lockdown measures and ensuing economic crisis, not from climate mitigation efforts, and would have otherwise likely missed it by around 20 MtCO2e. A recent study by think tank Agora Energiewende estimates emissions in 2021 to rise by 47 MtCO2e compared to 2020. This equates to a 37% reduction compared to 1990 levels, hence rising above the 40% national reduction target for 2020 (Agora Energiewende, 2021a), when they need to be continuing a downward trend.

Under current policies Germany misses its updated 2030 target by 104-140 MtCO2e. The CAT analysis does not yet quantify the additional impact of the measures under the new climate package and Climate Protection Emergency Programme (‘Sofortprogramm Klimaschutz 2022’) from June 2021. The measures will have a positive impact on emissions reductions but are not yet likely to be sufficient to meet the new targets, as the programme is missing important elements such as moving the coal phase-out date forward, or taking measures to achieve a faster uptake of electric vehicle sales.

In 2020, Germany’s emissions (excl. LULUCF) were 40.7% below 1990 levels excl. LULUCF or 739 MtCO2e in total. That is 70 MtCO2e or 8% less than in 2019. However, the Federal Environment Agency indicated that around one third of these emissions reductions were due to the consequences of the COVID-19 pandemic, especially in the transport and energy sector (German Federal Environment Agency, 2021). Important other drivers of the emissions reductions were higher CO2 prices, and the first shutdowns of lignite and hard coal-fired power plants following the coal compromise.

We used two scenarios to project Germany’s emissions pre-COVID19: one is based on the updated reference case of the projection report (“Projektionsbericht”) published by the Federal Environment Agency in March 2020, which includes measures that were implemented up to 29 January 2020 (German Federal Environment Agency, 2020). The other scenario, published on behalf of the German Ministry for Economic Affairs and Energy (BMWi) in March 2020, also quantifies the measures included in the Climate Action Programme (Kemmler et al., 2020). We harmonise both scenarios to the latest available historical data and use the updated lower emissions value for 2020 (739 MtCO2e) published by the Federal Environment Agency (German Federal Environment Agency, 2021).

Both scenarios lead to emissions reductions in 2030 of between 53% (Federal Environment Agency) and 55% (BMWi) below 1990 levels, not sufficient to meet Germany’s 65% reduction target. Taking into account the potential continued impact of the COVID-19 pandemic (see below for method), we estimate that emissions could be reduced by 54% - 57% below 1990 levels in 2030.

The emissions trajectory will be strongly dependent on the continued speed and character of the post-pandemic economic recovery. In June 2020, the German government agreed a EUR 30bn stimulus package. Along with more general measures such as a VAT reduction for the second half of 2020 and other tax rebates, it includes a EUR 50bn “package for the future” that contains investments into climate-friendly technologies and mobility (German Government, 2020a). While the overall focus on climate-friendly technologies was welcomed, NGOs criticised the government for missing the opportunity to fully align the programme with its climate targets (Wehrmann and Wettengel, 2020).

In June 2021, in the wake of a constitutional court ruling that Germany’s climate targets were not strong enough and in light of the upcoming elections in September 2021, Germany adopted an amendment to its climate law, including updated national climate targets (German Government, 2021a).

The law includes the target of a 65% national emissions reduction below 1990 levels by 2030 (up from 55%), a new, interim target of 88% below 1990 levels by 2040, and climate neutrality by 2045 - five years earlier than its previous net zero date. The amended law also includes stricter, binding sectoral emission budgets up until 2030, with most of the additional reductions needed in the energy and industry sectors. It further includes targets for natural carbon sinks and strengthens the role of the Expert Council on Climate Change by extending its responsibilities. The council verifies the annually calculated emissions projections of the Federal Environment Agency, including its sector allocation. If the expert council finds that a sector is falling short of meeting its target, the responsible ministry has to submit an emergency programme within three months.

In addition to the amended law, Germany adopted a climate and energy package in June 2021. The government agreed on exempting green hydrogen from the renewable energy levy and on raising the tender volume for wind from 3 GW per year to 4 GW and for solar PV from 4 GW to 6 GW – a step into the right direction but still far behind the historical highs of 7 GW and 8 GW, respectively.

Missing from the agreed package are a higher CO2 price, earlier coal phase-out and targets for the expansion of renewables beyond 2022. More companies will be exempted from paying the CO2 price to prevent them from moving abroad for competitive reasons. The German government has further passed a Climate Protection Emergency Programme of more than EUR 8bn for various climate protection measures over a period of five years from 2022. More than half of the money will be spent on energy-efficient buildings, and about EUR 650m will go into decarbonising industry (German Government, 2021b).

The devastating flooding that has hit parts of Germany in summer 2021 brought broad awareness for the negative impacts of climate change in Germany and growing demand for increased and early climate action by all countries, in particular an earlier coal phase-out date.

Energy supply

According to the updated German government targets legislatively anchored in the climate law, the energy sector will have to limit its GHG emissions to 108 MtCO2e by 2030 (previously 175 MtCO2e). This is a reduction of 62% below 1990 levels. In 2020, emissions from the energy supply sector stood at 221 MtCO2e, a reduction of 38 MtCO2e or 14.5% compared to the previous year. Emissions from electricity generation in 2020 fell by 35 MtCO2e or 16% compared to 2019 and resulted in a total of 185 MtCO2e emitted (Agora Energiewende, 2021b). Compared to 1990, emissions from electricity generation fell by almost half.

A driver of this significant reduction is the decrease in emissions from electricity generated from lignite (-23 MtCO2e) and hard coal (-13 MtCO2e). This is mainly due to higher CO2 prices as well as low world market prices for gas, which made coal-fired power plants generally more expensive to operate (German Federal Environment Agency, 2021). As a result of the pandemic, electricity consumption dropped by more than 4% in 2020, but monthly consumption was already back to pre-pandemic levels by October 2020 (German Federal Environment Agency, 2021; Wehrmann, 2021). A relatively mild winter in 2020 also led to low heating energy consumption (Agora Energiewende, 2021b).

Overall, Germany’s electricity mix is still heavily dependent on fossil fuels. While coal generation has halved since 2015, natural gas has more than doubled its share, currently making up 16% of Germany’s electricity mix and total fossil generation has fallen by only 31% (Ember, 2021a). German power plants emitted about 10 MtCO2e more in the first quarter of 2021 than in the same period in the previous year, which could foreshadow rising emissions in 2021 (Agora Energiewende, 2021c).

The slow and 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 longer-term targets for 2030 and 2050, and a burden to global emissions budgets which require a coal phase-out by 2030.

Implementing all measures proposed in the Climate Action Programme would lead to a remaining 183 - 186 MtCO2e by 2030 for the energy sector, leaving an emissions gap of between 75-78 MtCO2e to reach the updated target (German Federal Environment Agency, 2020; Kemmler et al., 2020). These figures do not take into account the potential impact of COVID-19.

Coal phase-out

Around two-thirds of the emissions from electricity generation in 2020 are attributable to lignite and hard coal-fired power plants. Coal-fired power generation has halved over the past five years, but still contributes 24% of total electricity generation (Agora Energiewende, 2021d; Ember, 2021a). That means that in 2020 about 16% of total German emissions still came from power and heat generation from coal-fired power plants.

In July 2020, the German government adopted a coal exit law that stipulates the last coal-fired power plant will be closed by 2038 at the latest. In November 2020, the European Commission approved the proposed competitive coal phase-out tender mechanism under the coal exit law (European Commission, 2021). In the first three rounds of auctions the Federal Network Agency awarded bids with a combined capacity of around 8.7 GW. The operators received up to EUR 150,000 for each MW of installed capacity that will be phased out by the end of 2022 at the latest (Bundesnetzagentur, 2021a, 2021b).

The schedule of Germany’s planned coal phase-out by 2038 is not fast enough to be compatible with a 1.5°C pathway: the CAT benchmark analysis shows that the share of unabated coal in the power sector should be phased out by 2030 for EU countries, i.e. a full coal phase out for Germany by 2030, eight years ahead of its current plans. Germany’s coal generation in 2020 has also declined at a much slower rate (-51%) than in other countries such as the UK (-93%) or Italy (-65%) (Ember, 2021a). An earlier coal phase-out could also be driven by the fact that hard coal power generation is no longer economically viable today, and the German fleet has collectively lost more than EUR 1bn since the end of 2018, meaning that the German government has spent EUR 317 million to close potentially loss-making plants in 2020 alone (Ember, 2021b).

Further, the coal exit law allows an exception for the ban on building new coal-fired power plants (German Government, 2020b). The text states that the ban does not apply to plants for which "an emission protection permit had already been granted by the time the law enters into force". As a result, the controversial 1,100 MW Datteln 4 coal-fired power plant went online in May 2020 (German Ministry for Economic Affairs and Energy, 2020a). This violates one of the principles of the Powering Past Coal Alliance, which Germany joined in 2019, agreeing to prohibit the construction of new coal-fired power plants (DIW, 2020).

Projections show that coal-fired power plants operating as planned under the German coal exit law would emit almost 2 GtCO2e cumulatively between 2030 - 2038 (DIW, 2020). This is roughly half of Germany’s carbon budget under the CAT’s estimation of Germany’s “fair share” contribution towards limiting global warming to 1.5°C. The compromise was found only by compensating the affected regions (EUR 40bn and the affected companies operating the coal-fired power plants (additional EUR 4.35bn) (Agora Energiewende, 2019; Bundesministerium für Wirtschaft und Energie, 2019).

Research shows the German government is overcompensating the coal companies by almost EUR 2bn when comparing the difference between a generous, rule-based compensation and the actual proposed lump-sum compensation (Matthes et al., 2020). A recent study even shows that when correcting for problematic assumptions taken by the Economic ministry, compensation could be reduced to EUR 343 million (Ember, 2021c). Coal-fired power plants will probably not be economically viable in the short run anyway, due to increased prices of CO2-certificates, which are expected to further increase in the context of the European Green Deal (Fraunhofer ISE, 2020a; Matthes et al., 2020).

Renewables

The share of renewables in total electricity consumption reached a peak of 46.2% in 2020, but at the same time the expansion crisis for wind power continued and studies find that almost half of the higher renewable share in 2020 was attributable to the COVID-19-induced drop in electricity demand (Agora Energiewende, 2021d; Fraunhofer ISE, 2020a). In the first half of 2021, electricity generated from renewable sources covered 47% of total German consumption, down from 52% in the same period in the previous year, as weather conditions brought little wind and sunshine (Fraunhofer ISE, 2021a; Wettengel, 2021; ZSW; BDEW, 2021).

For renewables, the new climate and energy package adopted in June 2021 raises the tender volume for wind power from 3 GW per year to 4 GW and for solar PV from 4 GW to 6 GW – a step in the right direction but still far behind the historical highs of 7 GW and 8 GW, respectively. Other studies have estimated onshore wind installations would need to increase to at least 4.4 GW to reach the government target (Oei et al., 2019).

Figure 1 gives an overview of Germany’s capacity additions for onshore wind, offshore wind and solar PV in recent years compared to the all-time high figures (2017, 2015 and 2011 respectively). After the end of the 2010-2012 solar boom that saw more than 7.5 GW of additions per year, installation rates fell to 1 GW in 2014 (AGEE, 2019), which saw more than 100,000 jobs lost by 2018 (Bundesministerium für Wirtschaft und Energie, 2018; DGB, 2021).

From 2019, solar PV installations underwent a significant increase, with almost 4 GW of newly- installed capacity in 2019, 5 GW in 2020 and 2.5 GW added in the first half of 2021 (Fraunhofer ISE, 2021b). Offshore wind installations peaked at 2 GW in 2015, then dropped significantly and have come to a complete stop in the first half of 2021 (Fraunhofer ISE, 2021b). Onshore wind installations peaked at 5 GW in 2017, have significantly dropped in 2019 (0.75 GW), but picked up again in 2020 with 1.47 GW of capacity added and stood at 0.83 GW in the first half of 2021 (Fraunhofer ISE, 2021b).

A change in the auctioning system and delays in issuing permits led to a delay in construction of auctioned amounts. As a consequence, wind energy companies are in serious economic trouble, losing approximately 40,000 jobs from 2016 to 2018, and the outlook is grim (Bundesministerium für Wirtschaft und Energie, 2018; DGB, 2021).

Share of renewable electricity in Germany - Historical trend and Paris Agreement compatible Benchmarks (sources: BMWi, DIW, CAT analysis).   

The German government aims to raise the share of electricity generated from renewable energy to 65% of gross electricity consumption by 2030 as per its Climate Action Programme 2030. This goal is not enough, given the relative ease with which emissions can be reduced through renewable energy compared to other sectors and also not aligned with the Paris Agreement, based on the benchmarks defined by the CAT for EU countries.

At the EU level, to be compatible with the Paris Agreement 1.5°C temperature limit, the share of renewables in the electricity sector needs to reach a minimum of 70-90% by 2030. For Germany, studies suggest that the share of renewable electricity in total generation needs to reach 85-100% by 2030 to be compatible with a 1.5°C pathway (Figure 2).

In January 2021, Germany’s Renewable Energy Act (EEG) 2021 came into effect. It plans to increase solar PV capacity to 100 GW (from 56 GW), onshore wind to 71 GW (from 55 GW), biomass to 8.4 GW, and offshore wind to 20 GW by 2030 - targets that slightly exceed those from the Climate Action Programme 2030 (German Ministry for Economic Affairs and Energy, 2020b). An additional 500-850 MW per year will be tendered in so called “innovation auctions” that are not technology-specific (Appunn, 2021a).

The measures are still not sufficient to meet the German governments 65% renewable energy target by 2030. A recent study shows that currently implemented measures including the Renewable Energy Act 2021 (EEG 2021) would only lead to a 55% share of renewable electricity generation in 2030 (EWI, 2021). The quantifications of the Climate Action Programme 2030 suggest the target is likely to be met (61-65% in 2030). However, this was only due to the underestimation of the electricity consumption. In fact, a more recent study on behalf of the economic ministry came to the conclusion that electricity consumption in 2030 will be about 11-15% higher than previously assumed by the government (German Ministry for Economic Affairs and Energy, 2021a).

Share of renewable electricity in Germany - Historical trend and Paris Agreement compatible Benchmarks (sources: BMWi, DIW, CAT analysis).
High resolution

In 2020, the government agreed the minimum distance regulations to settlements for wind turbines will be subject to individual decisions by the federal states. While this is a step into the right direction, if the states all adopt the national government’s attitude, this could drastically reduce space for wind turbines, making it difficult to reach annual capacity additions of 1.3-1.7 GW for onshore wind (German Federal Environment Agency, 2020; Umweltbundesamt, 2019).

In June 2020, Germany released its National Hydrogen Strategy (German Government, 2020c) that focuses on “green” hydrogen produced by using renewable energy, and sets out 38 measures for the period up to 2024 to support hydrogen production and to identify fields of application (German Government, 2020c). The government hopes to establish hydrogen as an alternative energy carrier to enable the decarbonisation of hard-to-abate sectors, like industry and aviation (Amelang, 2020). In addition to existing government programmes, the COVID-19 stimulus package includes a further EUR 9bn investment into supporting the technology development and hydrogen production in both Germany and partner countries, and to support a switch in industry processes. Planning with “green” hydrogen also implies an increased need for renewable energy.

Industry

The industry sector is responsible for more than a fifth of Germany’s total emissions. Sector emissions declined by 30% from 1990 to 2008 and have been stable since. However, emissions still need to be reduced by 59 MtCO2e to meet the new sectoral target of 119 MtCO2e/year by 2030 (previously 140 MtCO2e). The measures introduced in the Climate Action Programme would lead to a level of 143 MtCO2e/year by 2030, leaving a gap of 24 MtCO2e (German Federal Environment Agency, 2020; Kemmler et al., 2020).

In 2020, emissions from the industry sector decreased by 5% compared to 2019. According to the German Federal Environment Agency, economic effects as a result of the COVID-19 pandemic played an important role. The most significant reduction was in the steel industry, where crude steel production fell by about 10%, the manufacturing industry saw only slight decreases in emissions, while the strong construction industry led to higher process emissions in the mineral industry (German Federal Environment Agency, 2021).

The Climate Action Programme includes several measures focusing on the improvement of energy efficiency and 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 (German Government, 2019). Under the Climate Protection Emergency Programme of June 2021 a total of EUR 860m have been earmarked for the industry sector, including support for a switch to climate-friendly energy as well as support for the steel and chemical industries (German Government, 2021b).

In 2021, the German government introduced numerous measures aimed at accelerating decarbonisation of the industry sector. The measures included a EUR 2bn financial aid scheme supporting research on innovative technologies for decarbonising heavy industry, a strategy for climate-friendly steel production and an additional EUR 5bn on the climate-friendly restructuring of the steel industry between 2022 and 2024 (German Government, 2020d; German Ministry for Economic Affairs and Energy, 2021b; German Ministry of the Environment, 2021). While these are steps in the right direction, they are unlike to be sufficient to reach a full decarbonisation of the sector by 2045. For this purpose, clear implementation plans, targets, and incentives as well as technology breakthroughs are required.

For steel production, the largest emissions source within Germany’s industry sector, the CAT’s analysis indicates that to be compatible with the Paris Agreement the emissions-intensity of steel would need to be reduced by 45% by 2030 below 2015 levels for EU countries (Figure 3). Reaching these benchmarks requires a clear policy framework, including, for example, carbon contracts for difference, green hydrogen quotas, and investment security (Agora Energiewende, 2020).

Steel emissions intensity (per product)

Transport

According to the updated German government targets, transport sector emissions need to be reduced by 44% below 1990 levels, meaning they would have to fall to no more than 85 MtCO2e in 2030 (previously 95 MtCO2e). While at 146 MtCO2e in 2020, they are still close to 1990 levels today. In 2020, transport sector emissions decreased by 11.4% compared to 2019. However, the bulk of this reduction is due to the fact that fewer cars were driven during the first lockdown and only 2% of emissions reductions can be attributed to lower emissions from new passenger cars (German Federal Environment Agency, 2021).

Measures adopted until 2019 will reduce greenhouse gas emissions by 13 MtCO2e by 2030, leaving a gap of 62 to 65 MtCO2e over the next decade (Federal Environment Agency, 2020). This is the largest gap of all sectors in Germany. To close this gap the German Government proposed several measures in its Climate Action Programme that would lead to emissions of between 125 and 128 MtO2e in 2030, still leaving a gap of 40 to 43 MtO2e/year (German Federal Environment Agency, 2020; Kemmler et al., 2020).

Public transport

The government plans to increase its budget for the improvement and expansion of the public transport system to EUR 1bn per year from 2021 and EUR 2bn from 2025. Deutsche Bahn, the national rail company, and the government further plan to invest EUR 86bn 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 EUR 365 (German Government, 2019).

The impact of these measures is difficult to quantify but it can be assumed that they will contribute to emissions reductions and modal shift. As part of the COVID-19 recovery package the government has pledged to provide additional financial support for public transport in the order of EUR 2.5bn to municipalities and to inject further EUR 5bn into Deutsche Bahn for railway modernisation, expansion and electrification (CarbonBrief, 2020; German Government, 2020a).

The Climate Action Programme 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 also makes long distance commuting by car more attractive than public transport, i.e. leads to increased emissions.

Electrification of passenger vehicles

In Germany registrations of alternatively powered vehicles increased by 74% in the first quarter of 2021 compared to 2020 due to the financial incentives introduced by the German government (ACEA, 2021a). The share of electrically chargeable vehicles in total registrations increased from 3% in 2019 to 13.5% in 2020 and to almost 22% in the first quarter of 2021. However, only 45% of these vehicles were purely battery electric vehicles (BEV’s), a decrease from the 50% share in the same period 2020 (ACEA, 2021b, 2020). During the first quarter of 2021, registrations of BEVs and plug-in hybrids increased by 160% and 190%, respectively, still driven by government stimuli (ACEA, 2021c).

The German government has set a goal of seven to ten million electric vehicles in its fleet by 2030. Although the registration of new electric vehicles has significantly increased, by April 2021 only 700,000 were on the road (VDA, 2021). To reach this target the government has prolonged tax credits for company cars with batteries or plug-in-hybrid vehicles until 2030 and reduced the taxes for pure electric company cars up to a price of EUR 40,000 from 0.5% to 0.25% (German Government, 2019).

In 2019, the government agreed with the German car industry to increase the financial incentive for newly-purchased BEVs from EUR 3,000 to EUR 6,000 (EUR 3,000 from the Government and EUR 3,000 from manufacturers). The incentive was also expanded to cover vehicles above EUR 40,000, which were previously not eligible. However, the premium may lead to hidden price increases, given half of it is covered by the producers themselves. Small start-ups cannot cross-subsidise this premium from other business and may need to raise the price of the EVs, potentially cutting the effective premium in half. As part of the COVID-19 stimulus package, the government has decided to exempt EVs from vehicle tax until 2030 and has doubled the state’s share of the buyer’s premium for EVs until the end of 2021 from EUR 3,000 to EUR 6,000 (German Government, 2020a).

In 2020, the COVID-19 stimulus package introduced a EUR 2bn programme for investments into new technologies by car manufacturers, and another EUR 2.5bn for expanding EV charging infrastructure and supporting electric mobility research.

Although more than 10,000 new charging stations have been installed compared to the previous year, with 40,000 chargers by March 2021, the Government still falls short of its target of 50,000 public charging stations by the end of 2020 (BDEW, 2021; German Government, 2019c). The Climate Action Programme also stipulates that the number of public charging points for electric vehicles should increase to one million by 2030. All petrol stations will be required to have EV 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 would result in 604 chargers/million people in 2030, still significantly lower than Norway, where there are 3,400 public chargers/million people by August 2021 (NOBIL, 2021).

The number of private charging stations has also increased significantly since the Government introduced a financial support scheme in November 2020. Since then more than 300,000 requests for support have been registered and the initial funding pot has been increased from the original EUR 200m to EUR 400m (BDEW, 2021). This is an important development since nine out 10 charging processes take place at home or at work.

Carbon price

As of 2021 emissions trading was introduced on transport fuels. Certificates are distributed for a fixed price of EUR 25/tCO2 in 2021 rising to EUR 55/tCO2 in 2025 (previously proposed to be at EUR 10 and EUR 35 respectively). After 2025 new allowances will be auctioned in a corridor of EUR 55 to EUR 65/tCO2e (German Government, 2020e). All proceeds from the pricing system will be re-invested into climate protection or returned to citizens. If more allowances are needed than available, additional allowances can be purchased from other EU member states. Hence the effectiveness of the instruments also depends on the stringency of measures in other member states.

The impact of this new system is very difficult to predict. An initial price of EUR 25/tCO2e will only have limited effect. If demand supersedes the amount that is provided at a fixed price and allowances need to be purchased from other member states, this could see prices reaching relatively high levels.

Aviation

To avoid airlines from offering “dumping prices”, the Climate Action Programme 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 EUR 7.50 to EUR 13.03, from 2,500 – 6,000 km from EUR 23.43 to EUR 33.01 and for flights above 6,000 km from EUR 42.18 to EUR 59.43 (German Federal Ministry of Finance, 2019). Compared to the UK where the levy for flights above 2,000 km is EUR 83.35, this is still quite low.

Due to COVID-19 emissions from domestic aviation were down by almost 60% in 2020 compared to the previous year (German Federal Environment Agency, 2021). The pandemic caused passenger flights to drop by 93% in April 2020, compared to the 2019, and they were still down by 76% in the end of June (OAG, 2020). In June 2021, flights were already up by 140% compared to the previous year and it is likely that the sector will fully bounce back once the pandemic is over (OAG, 2021).

In May 2020, the German government agreed on a EUR 9 billion rescue package for the largest German airline Lufthansa. In sharp contrast to bailout packages by other European countries, this bailout is not attached to any additional environmental requirements (Wilkes, 2020). As part of the COVID-19 stimulus package the government has put forward EUR 1 billion for modernising aviation, accelerating a shift towards more efficient aircraft fleets., and another billion for modernising shipping (German Government, 2020a).

Buildings

In 2020, the buildings sector was responsible for 16% of Germany's total emissions and is the only sector that had exceeded its annual emissions volume in 2020 as defined in the climate law (German Federal Environment Agency, 2021). Emissions have declined by 19% from 2010-2020 and still need to reduce further to meet the new sectoral target of 67 MtCO2e/year by 2030 (previously 70 MtCO2e). The measures introduced in the Climate Action Programme would only lead to a level of 78 - 87 MtCO2e/year by 2030, leaving a gap of 11 to 20 MtCO2e (German Federal Environment Agency, 2020; Kemmler et al., 2020).

To close this gap half of the additional funds from the Climate Emergency Programme 2022 are earmarked to promote the energy-efficient refurbishment of buildings and the installation of energy-efficient heating systems (German Government, 2021b). The programme also includes plans to raise the minimum energy standards for new buildings. The impact of these additional measures on emissions in the sector has not yet been quantified.

Carbon price

As of 2021 emissions trading was introduced on fuels in the buildings sector. Certificates will be distributed for a fixed price of EUR 25/tCO2 in 2021 rising to EUR 55 /tCO2 in 2025. After that, new allowances will be auctioned in a corridor of EUR 55 to EUR 65/tCO2 (German Government, 2020e). If more allowances are needed than available, 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 were increased by ten percent from January 2021 onwards (German Government, 2019).

The impact of this new system is very difficult to predict. An initial price of EUR 25 /tCO2 will only have limited effect. 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 retrofits

Germany has a long tradition in providing low interest loans for renovation of buildings and support of renewable heating systems, especially for new buildings. As part of the COVID-19 recovery package the German government is providing an additional EUR 2bn for energy-efficient renovations of buildings, and another EUR 4.5bn as part of the Emergency Program 2022 (German Government, 2020b, German Government, 2021b).

As a new measure of the Climate Action Program 2020, energy-efficient retrofits of buildings used by the owner became tax-deductible in 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.

The German government further committed to reducing the carbon footprint of the buildings sector by about 40% by 2030 below 2015 levels. However, to be Paris Agreement-compatible, the CAT benchmark analysis for EU countries indicates that by 2030, emissions in the German buildings sector should be around 60% lower in residential buildings, and 75% lower in commercial buildings compared to 2015 levels.

According to the programme, new oil heating systems will be forbidden as of 2026, but existing systems can still be operated after this date. From 2023 onwards heating systems that run exclusively on fossil fuels will no longer subsidised by the government, as set in the Emergency Program 2022 (German Government, 2021b). These measure do not appear ambitious, as for example the Netherlands already since 2017 require that new buildings cannot use fossil fuel heating systems, not even gas (EnergyPost, 2017).

Agriculture

Since 1995 emissions from the agriculture sector have remained almost unchanged. The sectoral target for the agriculture sector is to emit no more than 56 (previously 58) MtCO2e/year by 2030. Compared to 2020, emissions would have to be reduced by 15%, or by 10 MtCO2e by 2030 (German Federal Environment Agency, 2021). With the measures introduced in the Climate Action Programme, the level is expected to still stand at 64 MtCO2e in 2030, leading to a gap of approximately 8 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 showing an emissions reduction potential of between 12.5 – 30.1 MtCO2e/year (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 be enough to reach the minimum target.

Overall, the plan proposes the expansion of organic farming which would constitute 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 expected 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.

In June 2021, the German parliament passed a legislative package for the national implementation of the EU Common Agricultural Policy (CAP), taking first steps of moving away from area-based farming subsidies to payments made depending on the environmental and climate performance of farmers in a new system of so-called eco-schemes (Deutscher Bundestag, 2021).

Germany will redirect 25% of the money from direct payments into eco-schemes, while the European parliament and other actors had advocated for a minimum of 30% (Appunn, 2021b). The package has been met with criticism from the German farmers association and environmental organisations alike, not being substantial enough to ensure meaningful climate action and even disadvantaging grassland and eco farms in its current set up (Koch, 2021; Lehmann, 2021).

Forestry

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 2019, the removal of CO2e has almost halved compared to 1990 (16 MtCO2e compared to 29 MtCO2e) while forests are increasingly suffering from the impacts of climate change. Even with the measures introduced in the Climate Action Programme, the sector would turn into a net emissions source and emit 16.3 MtCO2e/year by 2030, clearly missing the target of being an emissions sink of 25 MtCO2e by 2030 set in the updated climate law (German Government, 2019; German Government, 2021).

In 2021, the German government set up a EUR 1.5bn support programme for reforestation, managing damage and adjusting forests to the changing climate after the Forest Condition Report has found that more trees died in 2020 than any year before (German Federal Ministry of Food and Agriculture, 2020; Nijhuis, 2021). The support programme includes EUR 500m for climate action premiums that award forest owners who e.g. increase the CO2 storage capacity of their forests or ensure harvested wood is used in durable wood products (German Federal Ministry of Food and Agriculture, 2021).

Measures previously proposed in the Climate Action Programme 2019 include increasing efforts for reforestation and the adaptation of forests to changing weather patterns, increasing the capacity of soils as carbon sinks and better protection of moors and wetlands, in a general effort to make carbon sinks more resilient to extreme weather events (German Government, 2019). The COVID-19 recovery package further included an additional EUR 700 million for the conservation and sustainable management of forests (German Government, 2020a).

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).

Waste

In 1990 the German waste sector still emitted 38 MtCO2e (3% of total emissions). By 2020, emissions were at just below 9 MtCO2e - a decrease of 76% and contributing only about 1% of total emissions (German Federal Environment Agency, 2021). This was achieved mainly by ending the disposal of untreated residential waste and the increased utilisation of energy and materials from waste (Umweltbundesamt, 2017). Since 2005 landfilling of biodegradable waste is prohibited in Germany. The continued downward trend in 2020, minus 4% compared to 2019, is essentially determined by decreasing emissions from landfilling (German Federal Environment Agency, 2021).

The Climate Action Programme 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, 2019). If these measures were to be implemented emissions in the sector would reach 4.9-5 MtCO2e in 2030 meeting the sectoral target of 5 MtCO2e set in the climate law.

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