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Germany to step up its climate ambitions

In mid-May, the Federal Cabinet agreed on a more ambitious Climate Action Act that is to guarantee climate neutrality as early as 2045 and aims to reduce the financial burden on consumers.

In recent weeks, lights have been burning well into the night in the offices of Federal Cabinet members. The task at hand was to flesh out the details of an amended Climate Action Act. In late April, the Federal Constitutional Court had issued a ruling declaring that the Act of 2019 lacked clear provisions for emission reductions in the period from 2031. The court in Karlsruhe had given the Federal Government one and a half years to revise the original Act. But it was already on 12 May that the Federal Cabinet was able to pave the way for a new Climate Action Act. According to Economic Affairs Minister Altmaier, the revision represents a milestone in German climate policy.

Germany is the first EU nation to implement the new European climate targets

Pursuant to the revised bill, Germany commits itself to becoming climate-neutral by 2045 – five years earlier than originally planned. By 2030, greenhouse gas emissions are to fall by 65% (instead of just 55%) compared with 1990 levels. By 2040, moreover, the Act now provides for emission reductions of 88%. This is to ensure that the challenging task of cutting GHG emissions is split up more fairly among the generations. By stepping up its climate ambitions, Germany seeks not only to make sure it complies with the provisions of its Federal Constitutional Court, but also and above all to be the first EU nation to implement the new European climate targets that were agreed last year under the German Presidency of the Council.

'The new Climate Action Act we have adopted in the Cabinet today places the Federal Government’s climate policy on a new, more ambitious footing. We are treading the bridge into a climate-neutral age,' commented Economic Affairs Minister Altmaier in a press statement.

Specific annual emission budgets for individual sectors, with the energy and industrial sectors bearing the brunt

The new rules are to give industry and business the certainty they need to plan ahead. They contain specific annual emission budgets for the energy, industrial, buildings, transport and agricultural sectors, with the energy sector and industry in particular being challenged to significantly reduce their GHG footprint in order to achieve the 2030 climate target. Should the EU guidelines change following the conclusion of negotiations on the Fit for 55 Package (probably by the end of 2022), the Federal Government can adjust its 2030 targets for the individual sectors. The package is to align the EU’s Climate and Energy Framework with the objectives of the Green Deal.

In addition to the bill, the Cabinet also adopted a key elements paper for a Climate Pact for Germany that had been coordinated among the Federal Ministries. The paper sets out some initial priorities for an immediate action programme which is to be drawn up. To this end, the budget allocation process for 2022 is to provide for additional funds of up to €8 billion for investments in the various sectors. A major focus here is on an investment pact with the industrial sector which aims to foster 'climate-friendly manufacturing in Germany' and to speed up the market ramp-up of the hydrogen economy.

'Germany is to remain a successful economy with ambitious climate targets in the coming decades,' Minister Altmaier said in Cabinet. 'We must support the economy in the process and be ready to provide the necessary funds to make this transformation a success. We can and we must show that climate change mitigation and economic activity are not a contradiction in terms, but two sides of the same coin.' In order to achieve its climate targets, Germany will also have to make a long-term commitment to proven market-driven instruments – such as carbon pricing – at both national and European level.

Easing the burden of the electricity price for tenants

Tenants, too, stand to benefit from the revised Climate Action Act. An accompanying resolution reduces the burden imposed on them by the electricity price, stipulating that landlords are to bear half of the costs incurred by the carbon price on oil and gas, which has been in force since January 2021. The revised Climate Action Act is to ensure that the move towards climate neutrality is irreversible and transparent. The Bundestag and the Bundesrat still have to give their approval before the bill can finally enter into force.