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3. ENERGY AND CLIMATE CHANGE

Figure 3.5 CO2 intensity in Germany and selected IEA member countries, 1990-2017

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1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 IEA 2019.

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Germany’s CO2 intensity per GDP (PPP) is steadily falling and below the IEA average, but it is higher than many other European countries and the IEA Europe average.

Note: IEA 30 = the 30 member countries of the IEA.

Source: IEA (2019), CO Emissions from Fuel Combustion 2019, www.iea.org/statistics/.

Figure 3.6 CO2 intensity of power and heat generation in Germany and in other selected IEA member countries, 1990-2017

Germany’s relatively high CO2 intensity is mainly a result of large emissions per kilowatt-hour from power and heat, which are above the IEA average and improving only slowly.

Source: IEA (2019), CO Emissions from Fuel Combustion 2019, www.iea.org/statistics/.

Institutions

The climate policy aspects of the Energiewende are primarily led by the Federal Ministry for Economic Affairs and Energy (BMWi), including policies that relate to the expansion of renewables and energy efficiency. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) has broad responsibility over managing environmental and climate change policies, including emissions reduction strategies, climate protection and climate adaptation. Both the BMWi and the Federal Ministry of the Interior, Building and Community (BMI) oversee issues related to energy conservation in buildings. The Federal Ministry of Transport and Digital Infrastructure (BMVI) takes the lead on policies governing emissions reduction and fuels strategies for the transport sector.

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The Ecological Tax Reform originally introduced taxation on electricity as well as raised taxation on energy products in several steps from 1999 to 2003 to promote ecological behaviour (revenue raised was channelled into the public pension scheme to lower wage-related costs) (IEA, 2012). The 2010 Energy Concept underpinning the Energiewende calls for a reduction in GHG emissions by at least 40% by 2020, 55% by 2030 and 80-95% by 2050 (from a base year of 1990). The targets are subject to annual monitoring; the June 2018 report showed that Germany is not on track to meet its targets.

EU climate framework

As a member of the European Union, Germany’s climate policy is guided by the framework of EU climate policies: the 2020 climate package and the 2030 climate framework. Large combustion facilities in the power and industry sectors are part of the EU ETS, whereas non-ETS emissions are subject to the Effort Sharing Decision (ESD). Around half of Germany’s GHG emissions fall under the EU ETS system and half under the ESD. As part of the Paris Agreement, the European Union committed to cutting GHG emissions by 40% from 1990 levels by 2030 (Germany, like other EU countries, did not submit a separate Nationally Determined Contribution as part of the Paris Agreement) (BMU, 2019a). In addition, the European Union obliges member states to maintain or improve their anthropogenic climate balance from LULUCF in the period 2021-30 under the so-called LULUCF Regulation.

The EU ETS, which was launched in 2005, requires entities in the power and industrial sectors to participate in a region-wide cap-and-trade programme. Obligated companies can comply by reducing emissions in line with required reductions, buying permits to cover their shortfall or selling permits if they exceed required cuts. As such, the market for permits creates an EU-wide carbon price for the power and industrial sectors that is also relevant for German utilities and industry. Since the launch of the third phase of the ETS (2013-20), the power sector must purchase all its permits at auction, while industry receives 80% of its permits for free. The next phase of the programme (2021-30) will gradually phase out free allocations across sectors. The ETS shifted from national caps during its first two phases toward an EU-wide cap of 25% below 2005 levels by 2020 in Phase 3 and 43% below 2005 levels by 2030 in Phase 4 (European Commission, 2019a). The carbon price as part of the ETS to date has been relatively low due to a surplus of allowances, and therefore insufficient to drive major fuel-switching changes in the power and industry sectors on its own. However, recent changes to the ETS, including the introduction of a Market Stability Reserve for surplus allowances, has bolstered the carbon price; further strengthening of the carbon price will help improve the economic case for the German government’s planned coal phase-out.

The ESD requires Germany to reduce its emissions from non-ETS sectors by 14% by 2020, compared with 2005 levels. Germany is not on track to meet this target, with projected non-ETS emissions for 2020 around 11-12% below 2005 levels (EEA, 2018b). In particular, Germany has struggled to achieve emissions reductions in its transportation sector. The European Union has set new targets for non-ETS sectors for 2030, under which Germany is required to reduce its non-ETS emissions by 38% from 2005 by 2030. Failure to meet the targets means that Germany would have to rely on flexibility mechanisms, such as procuring credits from other member countries or international tradeable credits, to cover its shortfall, with the latter option ceasing under the new commitment period starting in 2021 (European Commission, 2019b).

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For industry, the Climate Action Plan 2050 aims for GHG reductions of 49-51% from 1990 by 2030 through measures such as research and development (R&D) and energy efficiency programmes. The plan targets a reduction of 66-67% by 2030 for the buildings sector, to achieve a “virtually” climate-neutral building stock by 2050, through measures including stringent standards for new buildings, incentives for upgrading the existing building stock and efforts to phase out the use of fossil fuels in heating (BMU, 2019b).

The plan targets transport sector emissions reductions of 40-42% by 2030 and calls for the creation of task forces to make recommendations to the government on measures, including one to meet 2030 targets.

Lastly, agriculture is targeted to reduce emissions by 31-34% by 2030, including by working with the Länder to improve fertiliser practices.

Figure 3.8 Sectoral targets in the Climate Action Plan 2050

Source: Reproduced from Ministry for the Environment, Nature Conservation and Nuclear Safety (2017).

Power sector

Germany’s Energiewende has borne the greatest results in the power sector, based on a strong policy push to increase the role of renewable power in electricity generation. However, emissions reductions in the power sector have not fully kept pace with the rapid expansion of renewables in a context of increasing electricity exports and the nuclear phase-out, which will be completed by the end of 2022 (see Chapter 11 on nuclear); in addition to renewables, retired nuclear power was substituted by coaland gas-fired generation. To further reduce power sector emissions, the government is also planning a gradual phase-out of coal-fired generation with a goal to eventually move towards a more efficient and renewables-based power system in order to meet longer-term climate targets.

Renewables

Drastically expanding the role of renewable energy is a central plank of the Energiewende and of achieving Germany’s emissions reduction goals, and an area in which the country has made exceptional progress (see Chapter 5 on renewables).

Under the 2010 Energy Concept, renewable energy is supposed to account for 18% of gross final energy consumption by 2020, as required by the European Union. Beyond 2020, the German government will seek to increase the share of renewables to 30% by 2030, 45% by 2040 and 60% by 2050.

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fired power generation will lead to massive structural changes, especially in lignite regions. The commission adopted a range of measures to ensure that these changes result in sustainable, forward-looking structural development, including EUR 40 billion in transitional assistance to affected regions. The government is in the process of formulating its response to the recommendations and aims to finalise legislation around the coal phase-out in early 2020.

Transportation sector

From a sectoral perspective, transport has been the biggest laggard on emissions reductions and the most significant impediment to Germany meeting its GHG targets. In addition to efficiency improvements in line with EU requirements as well as electric vehicles (EVs), the Climate Action Plan 2050 also identifies alternative fuel engines, local public transport, rail, cycling, walking and digitalisation as playing important roles in achieving climate targets in the transport sector (see Chapter 4 on energy efficiency for more detail on transportation sector policies).

In order to address the lack of progress on transport emissions reduction, the government first launched the National Platform on Electric Mobility (NPE) in 2010 to develop marketbased measures that will help transform Germany by 2020 into a leading producer and market for electric mobility systems, including EVs as well as supply chain components and infrastructure. The task force comprised representatives from industry, academia, government, labour unions and civil society. The NPE recommended an approach focused on significantly expanding R&D by the industry, supported by governmental financial assistance, as well as promoting skills training, technology standardisation, and crosssectoral technological integration (Nationale Plattform Elektromobilitat, 2012). The NPE also recommended complementing these efforts with incentives to encourage consumer uptake of electric cars, including fiscal incentives, low-interest loans, and priority lane and parking access.

More recently, the government in September 2018 replaced the NPE with the National Platform Future of Mobility (NPFM). The goal of the platform is to recommend measures for Germany to meet its target from the Climate Action Plan 2050 of cutting transport emissions by 40-42% by 2030. The NPM is administered out of the BMVI; it is composed of representatives from relevant ministries, states, local government, industry, labour unions and civil society (Nationale Platform Future of Mobility, 2019). Like its predecessor and the Coal Commission, the NPM is meant to develop proposals in an inclusive and consultative manner to ensure broad public support. The platform is meant to consider transport beyond just EVs to include other modes of transportation to create a “largely greenhouse gas-neutral and environmentally friendly transport system that enables efficient, high-quality, flexible, available, safe, resilient and affordable mobility in both passenger and goods transport.” The platform has six working groups:

transport and climate change

alternative drive technologies and fuels for sustainable mobility

digitalisation in the mobility sector

securing Germany as a place for mobility, production, battery cell production, primary materials and recycling, training, and qualification

connecting mobility and energy networks, sector integration

standardisation, certification and accreditation.

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Energy efficiency

In the Energy Concept from 2010, Germany set the target of cutting primary energy consumption by 20% by 2020 and by 50% by 2050, compared with base year 2008 (see Chapter 4 on energy efficiency).

As Germany is making progress on decarbonising electricity supply, decarbonisation of heat supply in buildings is becoming a more important focus area. In line with its overall efficiency targets, the federal government has set a goal to achieve a virtually climateneutral building stock by 2050. In order to reach the long-term goal, a wide range of measures has been implemented, including financial incentives for investments, energy research initiatives, and consultation and information to consumers.

One of the main sources for financing energy efficiency measures and programmes in Germany is the Energy and Climate Fund, established by federal law in 2010 and financed with revenues from permit auctions under the EU ETS (BMWi, 2019b). Programmes range from direct financial support to information, communication measures and advisory services. In 2018, auction revenues directed EUR 2.6 billion into the fund, in addition to EUR 2.8 billion of federal budget funds that were also allocated to the fund.

While reducing total primary energy consumption by more than 10% since 2008, Germany is not on track to meeting its ambitious 2020 efficiency targets. As such, the government has adopted an “efficiency first” approach to emissions reduction that will emphasise the role that energy efficiency can play in achieving GHG targets. To this end, the government plans a cross-sectoral Energy Efficiency Strategy as well as NAPE 2.0 that will outline specific efficiency measures that the government will pursue over the period 2021-30. The release of the plan will be co-ordinated with finalisation of the NECP and a planned climate bill (see below).

Climate Action Programme 2030

The German government aims to aggregate a first programme of measures, including those that reflect the work of the coal and mobility commissions. As part of this effort, and to elevate the issue of climate change on the policy-making agenda, the government in March 2019 formed a so-called climate cabinet. The cabinet, which is headed by the chancellor, includes representatives from the ministries of economic affairs and energy, environment, transport, finance, and agriculture; the environment minister serves as the deputy chair of the group. The cabinet on 20 September released the Climate Action Programme 2030, a package of measures that comprised climate legislation that was passed into law in December 2019.

The climate policy package targets a reduction in the energy sector’s carbon emissions to 175 million tonnes (Mt) to 183 Mt by 2030. For the electricity sector, it recommends a 65% target for renewables by 2030 (as adopted by the coalition agreement). To this end, it proposes extending the solar support scheme by abolishing the current capacity cap of 52 gigawatts (GW), raising the target for offshore wind capacity to 20 GW, and imposing a 1 000-metre minimum distance between onshore wind installations and residences to address social acceptance.

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