Germany’s Government Shakeup Puts Key Climate Laws in Limbo

Germany’s government shakeup means eight pieces of legislation considered crucial for the energy transition are stuck in limbo until a new administration is formed next year, with the possibility they may not be enacted at all.

Author of the article:

Bloomberg News

Petra Sorge

Published Nov 14, 2024  •  3 minute read

Cyclists and motorists cross a bridge over the Spree river near the Mitte Combined Heat and Power natural gas power plant in Berlin, Germany. Photo by Krisztian Bocsi /Bloomberg

(Bloomberg) — Germany’s government shakeup means eight pieces of legislation considered crucial for the energy transition are stuck in limbo until a new administration is formed next year, with the possibility they may not be enacted at all.

The bills are meant to help Europe’s biggest economy cut its carbon emissions by two-thirds this decade while expanding renewables and lowering energy costs. They were already approved by Chancellor Olaf Scholz’s three-party government but still need to pass parliamentary votes.

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Those debates are now delayed until after elections pegged for February. The nation is already falling behind on its climate obligations for transportation and buildings, among other areas, and may miss 2030 targets if policies aren’t implemented fast enough.

The ramifications could be severe. A future government may have to spend more over a shorter period to meet that deadline, or it may even reassess the broader effort to reach Germany’s net neutrality target in 2045.

If Germany pushes back any of its goals, that may give other EU nations the necessary political cover to delay theirs, as well.

“In these sectors, companies will find it difficult to make investment decisions or may even delay them as far as possible until it is clear whether there is a legal framework,” said Katrin Andrä, a partner of legal firm Noerr LLP whose clients include the energy industry.

Here are details about some of the issues.

1. Clean industry push

The much-ballyhooed €23 billion ($24.3 billion) clean industry push is now on ice. The second round of auctions for so-called contracts for difference can’t proceed without the option for implementing carbon capture or without a 2025 budget.

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For Germany’s power-hungry steel industry, the political unknown — combined with the US presidential vote for Donald Trump — means further uncertainty, said Gunnar Groebler, chief executive officer of Salzgitter AG. The nation’s biggest steelmaker, ThyssenKrupp AG, already put its key green project under review.

“We need exactly the opposite in the transformation toward a climate-neutral steel industry: namely, predictability and reliability,” he said.

2. Expanding the use of gas-powered plants

As Germany phases out coal and has no more nuclear capacity, it needs gas-fired plants to fill the gap when wind and solar aren’t available. The sites would later be converted to hydrogen.

The government wanted to line up investors for 5 gigawatts of new capacity by early next year, but the tenders have been delayed by months of negotiations and spending hurdles. Economy minister Robert Habeck said Monday he would soon present a draft law for the plants.

In principle, he should find cross-party support. The opposition CDU/CSU conservative alliance said in a new energy agenda that it wants to “quickly” bring these plants online.

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However, Habeck’s proposal is unlikely to pass because he hasn’t published the draft bill yet, and Scholz announced a confidence vote in parliament on Dec. 16, meaning lawmakers would only have two weeks left in the year to finalize projects.

3. Carbon capture and storage

The conservatives singled out the government’s bill on carbon capture and storage, or CCS, as a priority, and cross-party talks are underway, CDU energy politician Oliver Grundmann told Handelsblatt this week. The technology is key to help clean up emissions-intensive industries such as cement or waste disposal.

The draft law also would make CCS possible on gas power plants, a condition added by the pro-business Free Democrats that have now left the government.

However, since that’s opposed by the Greens and Scholz’s Social Democrats — with the latter ruling out carbon capture on fossil-fuel infrastructure in a paper last year — the proposal likely is dead.

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