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Article:

Climate and energy policy aspects of the new coalition agreement

26 November 2021

Dr. Christian Hampel, Partner, Lawyer |
Dr. Mirko Sauer, Lawyer |

The coalition agreement of the future German government was presented on November 24, 2021. It includes some important aspects and goals of future climate and energy policy.

The decision to phase out coal is being upheld. It is to be accelerated and ideally completed by 2030. In order to meet the rising demand for electricity and energy over the next few years at competitive prices, the expansion of renewable energies is to be driven forward massively and modern gas-fired power plants are to be built.

  • Natural gas is indispensable for a transitional period.
  • The gas-fired power plants required until security of supply is provided by renewable energies should also be built at existing power plant locations.
  • These gas-fired power plants must be built in such a way that they can be converted to climate-neutral gases (H2-ready).
  • The national hydrogen strategy will be updated in 2022. The goal is a rapid market ramp-up. First priority is given to domestic production based on renewable energies. For a fast ramp-up and until an inexpensive supply of green hydrogen is available, the focus will be on a technology-neutral design of hydrogen regulation.
  • An electrolysis capacity of 10 GW is to be achieved by 2030.
    • This is to be ensured, among other things, through the expansion of offshore wind energy as well as European and international energy partnerships.
    • The development of a hydrogen infrastructure is to be promoted (financially).
  • When importing hydrogen, the effects of climate policy should be taken into account and fair competitive conditions for German industry ensured. At the European level, the German government advocates uniform certification of hydrogen and its downstream products and stronger European import partnerships.
  • In der öffentlichen Beschaffung sollen Quoten für grünen Wasserstoff eingeführt werden.
  • Green hydrogen should be used primarily in those sectors of the economy where it is not possible to convert processes and procedures to greenhouse gas neutrality through direct electrification.
  • Germany is to become the lead market for electromobility, the innovation location for autonomous driving.
  • At least 15 million fully electric passenger cars are to be put on the road by 2030.
  • The expansion of the charging station infrastructure is to be massively accelerated. By 20300, one million publicly and non-discriminatorily accessible charging points are to be built.
  • The research and market ramp-up of synthetic fuels in aerospace is to be supported.
  • According to the proposals of the European Commission, only CO2-neutral vehicles will be permitted in the transport sector in Europe in 2035. Outside the existing system of fleet limits, the German government is working to ensure that only vehicles that can demonstrably be fueled with e-fuels can be newly registered.
  • The expansion of renewable energies is to be accelerated drastically.
  • The renewables target is set at a higher gross electricity demand of 680-750 TWh in 2030. Of this, 80 percent is to come from renewables.
  • In order to achieve the massive expansion, instruments for subsidy-free expansion (such as long-term power supply agreements (PPAs)) are to be used in addition to the EEG, and Europe-wide trading in guarantees of origin is to be strengthened.
  • The decentralized expansion of renewable energies is to be strengthened. It should be possible to use renewable electricity more in the region where it is generated, especially from plants that have been subsidized and plants that are not subsidized under the Renewable Energy Sources Act.
  • Planning and approval procedures are to be significantly accelerated.
  • Expansion of photovoltaics
    • Photovoltaics are to be expanded to around 200 GW by 2030.
    • To this end, grid connections and certification are to be accelerated, remuneration rates adjusted, and mandatory tenders for large rooftop systems and caps examined. Innovative solar energy such as agri- and floating PV is also to be strengthened and co-utilization made possible.
    • All suitable roof areas are to be used for solar energy in the future. This should be mandatory for new commercial buildings and the rule for new private buildings.
  • Onshore wind energy
    • Two percent of the state's land area is to be designated for onshore wind energy.
    • The expansion of wind energy is also to be significantly strengthened in regions with less wind potential. Onshore wind energy should also be available close to consumption throughout Germany and grid bottlenecks avoided.
    • It should be possible to replace old wind turbines with new ones without major approval effort.
    • Municipalities should be able to benefit appropriately financially from wind turbines and larger ground-mounted solar plants on their territory.
    • The framework conditions for citizen energy should be improved (energy sharing, examination of a fund to cover the risks).
  • Biomass
    • Bioenergy in Germany is to have a new future. To this end, a sustainable biomass strategy is to be developed.
  • Offshore
    • Offshore wind capacity is to be increased to at least 30 GW in 2030, 40 GW in 2035, and 70 GW in 2045.
  • Geothermal energy
    • The potential for geothermal energy is to be exploited to a greater extent by improving the data situation and examining an exploration risk insurance.

As part of the amendment to the tax, levy and apportionment system, the promotion of tenant electricity and neighborhood concepts is to be simplified and strengthened.

Storage facilities should be legally defined as an independent pillar of the energy system.

Comprehensive municipal heating planning and the expansion of heating networks are to be ensured. The aim is to achieve a very high share of renewable energies in heating. By 2030, 50 percent of heat is to be generated in a climate-neutral manner.

  • The nuclear phase-out in Germany will be maintained.
  • At the international and European level, the German government is working to ensure that nuclear energy pays for the costs it causes itself.
  • The new federal government will advocate the shutdown of high-risk reactors close to the border.
  • Electricity and hydrogen grids are seen as the backbone of the energy system of the future.
  • Grid expansion is to be further accelerated in the interest of a massive expansion of renewable energies.
  • Grid infrastructures are to be planned more jointly and with greater foresight at all political levels in the future.
  • A "Roadmap System Stability" is to be presented by mid-2023.
  • Distribution grids are to be modernized and digitized, including through forward-looking planning and greater controllability. The rollout of smart metering systems as a prerequisite for smart grids is to be accelerated considerably.
  • Attractive investment conditions for the provision of capital for the grid infrastructure are to be ensured in the future.
  • A reform of network charges is to be pursued. Transparency is to be strengthened, the transformation to climate neutrality is to be promoted, and the costs of integrating renewable energies are to be distributed fairly.
  • A new electricity market design ("climate-neutral electricity system") is to be developed.
  • In order to stimulate the rapid addition of secure capacity and secure the nuclear and coal phase-out, existing instruments are to be evaluated and competitive and technology-neutral capacity mechanisms and flexibilities are to be examined. These include, among others, secured renewable capacity, highly efficient gas-fired power plants with cogeneration as part of the further development of the relevant law, an innovation program to be able to incentivize H2-ready gas-fired power plants also at coal-fired power plant sites, storage facilities, energy efficiency measures and load management.
  • The financing architecture of the energy system is to be reformed.
    • Incentives for the cross-sector use of renewable energies, decentralized generation models and the avoidance of greenhouse gas emissions are to be strengthened. To ensure that renewable electricity is used economically for sector coupling instead of shutting down plants due to grid bottlenecks.
  • State-induced price components in the energy sector are to be fundamentally reformed. The CO2 price is to play a central role in this.
  • The financing of the EEG levy via the electricity price will be terminated and is to be taken over by the state budget as of January 1, 2023.
  • With the completion of the coal phase-out, support for renewables is to be phased out.
    • As part of these changes, all exemptions from the EEG surcharge and energy taxes as well as the compensation regulations will be reviewed and adjusted. The aim is to reduce tax concessions relating to the economic use of electricity, taking into account the relief provided by the elimination of the EEG surcharge. As a result, companies should no longer be burdened overall.
  • European emissions trading and the Fuel Emissions Trading Act (BEHG) are to be revised in line with the EU's "Fit for 55" program. The German government will focus on a rising CO2 price.
    • The European Commission's plans to strengthen the existing emissions trading system are supported.
    • The German government will lobby at European level for an ETS minimum price and for the creation of a second emissions trading scheme for the heat and mobility sectors (ETS 2).
    • In the 2030s, there should be a uniform EU emissions trading system across all sectors that does not shift burdens unilaterally to the detriment of consumers.
    • The price in the ETS is currently around 60 euros/ton. The German government assumes that this price will not fall below in the future, but rather rise. If developments in the next few years are different and the European Union has not agreed on an ETS minimum price, the new German government will decide on the appropriate national measures (such as certificate deletion or minimum price, etc.) to ensure that the CO2 price does not fall below 60 euros/ton in the long term.
  • The Fuel Emissions Trading Act (BEHG), including covered fuel emissions in industry (industrial process heat), should be reviewed for compatibility with a possible ETS 2 and, if necessary, adjusted to ensure as smooth a transition as possible.  
    • Energy prices and CO2 prices should be considered together. The current SESTA price path should be adhered to.

The German government will lobby at European level for an initiative to establish an international climate club open to all countries with a uniform minimum CO2 price and a common CO2 limit compensation system.

  • An industrial strategy is to be developed that is embedded in a European solution in conjunction with the European Green Deal and prevents carbon leakage through appropriate measures.
  • In order to support the national industry, in particular the primary industry, suitable instruments shall be created to the extent sufficient to achieve the climate targets (e.g. Carbon Contracts for Difference (CCfD). These instruments shall be designed in such a way that the payback phases are achieved with sufficient probability. Support will be given to the introduction of a Europe-wide effective CO2 limit compensation mechanism or comparable effective instruments.