Clifford Chance has released “Snapshot of the German Coalition Agreement – Impact on Energy and Infrastructure in Germany”. On November 25, 2021, the coalition of Social-Democrats (SPD), Greens (Bündnis 90/Die Grünen) and Liberals (FDP) presented its Draft Coalition Agreement to the public. The new coalition will especially focus on climate protection as well as on the modernisation and digitalisation of Germany. To achieve these goals, the current regulatory frameworks will be adapted, and investments will be made in digitalisation, education and research. The briefing summarizes and assesses the key aspects of such changes to the regulatory frameworks regarding energy and infrastructure.
REGlobal presents the key findings and the detailed analysis of the coalition agreement as highlighted in the brief…
- New German government’s draft Coalition Agreement sets a clear focus on climate protection and digitalization.
- The coalition aims to strengthen and promote Germany as a globally leading economy by massively increasing investments in the fields of electro-mobility, renewables and hydrogen as well as by simplifying permitting procedures.
- Amongst others, the building sector targeted to achieve climate protection goals by supporting technical measures for the optimization of energy demand as well as decentralized generation of renewable electricity with funding programs.
The new government intends to push for Germany to become the leading market for electromobility and a centre of innovation for autonomous driving. To reach this goal, the new government sets out the goal of 15 million fully electric vehicles to be registered by 2030. Additionally, the coalition wants to support the introduction of the EURO 7 standard, planned to be passed in 2022. The expansion of charging stations shall be massively accelerated with an aim to create one million publicly accessible charging points by 2030, with a focus on fast-charging infrastructure. Obstacles in the permitting process, in network infrastructure and network connection conditions shall be reduced and the municipalities shall be supported in the planning process, to make investments more attractive. The new government is committed to the continuation and further development of the European battery projects and plans to incentivize the construction of further cell production sites, including recycling, in Germany.
The coalition is aiming at a share of 80 per cent renewable electricity which at an electricity demand of 750 TWh would correspond to 600 TWh of renewable electricity by 2030 (currently the targeted share of renewable electricity is 65 per cent by 2030). The new Government intends to give renewable energies priority in planning and approval “until climate neutrality is achieved”. Uniform protection standards are to be introduced for species protection. The coalition agreement foresees specific expansion targets for photovoltaics which shall reach a capacity of 200 GW in 2030. The coalition agreement does not specify any targets for onshore wind energy but nevertheless stipulates that 2 per cent of each Federal State’s surface area shall be reserved as land for onshore wind power. For offshore wind power, the capacity targets are raised significantly to 30 GW in 2030 and 70 GW by 2045. The expansion of renewables shall be financed with the revenues, inter alia from national emissions trading.
Another key goal of the coalition is the facilitation of green hydrogen as an energy source, especially where electrification is not feasible. Therefore, the coalition has decided to build on the previous government’s National Hydrogen Strategy and to accelerate the ramp-up of a hydrogen economy in Germany and Europe. In this regard, the coalition agreement essentially comprises the following:
Technology neutrality with a focus on green hydrogen: To allow an efficient and fast market ramp-up, the coalition has decided to take a technology-neutral approach to the regulation and production of hydrogen while nevertheless favouring the production of green hydrogen.
Electrolysis capacity: The coalition has doubled the previous targets for building up an electrolysis capacity from 5 GW to an even more ambitious 10 GW to be installed by 2030 as the initial hydrogen demand forecasts have increased.
Increase of demand: As a demand-side measure, the utilization of green hydrogen shall be promoted by way of quotas in public procurement in order to facilitate a market ramp-up for (green) hydrogen. This method has proven efficient in the public transportation sector, e.g., with regard to the decarbonization of bus fleets.
Acceleration and promotion for the development of an H2 transportation network: The coalition also aims to advocate the swift implementation of Important Project of Common European Interest (“IPCEI”) hydrogen projects and financially support investments in the development of hydrogen transportation network infrastructure.
Heating: Although the coalition agreement is setting a goal of reaching 50 per cent climate neutrality in the heating sector by 2030 with a very high share of renewables, it remains silent on how this goal shall be reached whereas the coalition agreement lacks an explicit statement whether hydrogen will play a role in decarbonizing the heating sector.
In light of the recently held COP26 in Glasgow, the coalition supports a global carbon market which was introduced and agreed on as part of the ‘Paris Agreement Article 6 Rulebook’. Another important aspect of the new coalition’s plans is to revise the EU’s Emissions Trading System (“EU-ETS”) and the national emissions trading system (“nETS”). The coalition supports a minimum price for emission allowances under the EU-ETS which is currently approximately at 60 EUR per tonne to incentivise ambitious reductions in emissions. The coalition also supports the European Commission’s proposal to create a new separate upstream emissions trading system for emissions from fuels used in road transport and building. The coalition also supports the European Commission’s proposal for a Carbon Border Adjustment Mechanism (“CBAM”). The CBAM is a climate measure that aims to equalise the price of carbon between domestic products and imports to ensure that the EU’s climate objectives are not undermined by production relocating to countries with less ambitious climate policies (carbon leakage). The collation parties also support the formation of an international climate club with a joint CO2 border adjustment mechanism.
The Draft Coalition Agreement can be read here