The German coalition agreement – the final results

12 February 2018 16:23 Source:ICIS

On 7 February 2018, after months of negotiations, the conservatives party CDU and the social democrats SPD have reached a grand coalition agreement. The SPD will likely keep the environment ministry while CDU takes on the energy ministry. We looked on the coalition agreement text, which provides directions on the new German coalition´s position on energy and carbon.

Main points

  • According to media outlets (Spiegel, FAZ) the SPD is keeping the environmental ministry while energy ministry falls under the CDU
    • Both ministries are currently headed by SPD ministers including Brigitte Zypries (SPD) for energy and Barbara Hendricks (SPD) for environment
  • The text agreed between the CDU, CSU and SPD runs 177 pages
  • Two sections are relevant:
    • Page 71: Energy
    • Page 137: Environment and climate
  • Energy, grid and Renewables (RE)
    • Drive the energy transition in line with safeguarding international competitiveness
    • Continue market-oriented renewable capacity extensions with the aim to reach 65% RES in 2030
      • In this context the renewable capacity extension needs to be strengthened in order to offset additional power demand
      • Introduction of special renewable tenders – 4GW onshore wind and solar – to reduce CO2 emissions by 8-10m tonnes before 2020; half of the capacity should be built in 2019, the other half in 2020
    • Keep a single pricing zone in Germany by better steering RES capacity extensions regionally
  • Climate targets
    • Acknowledgement of EU 2020, 2030 and 2050 targets communicated in the Paris Agreement
    • New features will be used to close the gap to the national 2020 as soon as possible, no firm commitment to 2020 targets
    • Commitment to reach the 2030 national climate target
  • Set up a commission called “Growth, structural transformation and employment” which should
    • Work out a concrete plan to reduce the gap to reach the 40% reduction target in 2020
    • Make a plan for the step-wise reduction of coal fired generation including a closure date and concrete legal, economic, and social accompanying measures
    • The coal phase-out should consider the necessary steps to ensure a social balanced structural transformation by ensuring financial security
  • CO2 price system
    • Strengthen EU emissions trading as a key instrument
    • Our goal is a global CO2 pricing system, or at least including G20
  • Next steps
    • SPD members are expected to vote on the coalition agreement in a few weeks’ time – media outlets are reporting the weekend of 3/4 March as possible results for the vote
    • Please note that Germany´s Constitutional Court in Karlsruhe is currently looking into the legality of this SPD´s vote (Politico article link) – it is unclear when a final decision will be taken on all claims

Analysis

  • The energy and environment ministries play a key role regarding power market related matters in Germany
    • Therefore, the energy ministry changing hands from SPD to CDU is important
  • 2020 CO2 reduction target (40%)
    • Back in January, there were rumours that Germany would possibly post-pone reaching its 2020 target (see our analyst update)
    • The wording of the coalition agreement suggests new measures but specifies that the gap will be closed “as much as possible” leaving the door open for not reaching the target
    • For us that means that there is no commitment to reach the 2020 reduction target in 2020, but rather at a later date
  • 2030 CO2 target (55%): The wording is clear here in contrast to the 2020 target saying “we definitely want to achieve”
  • Coal phase-out
    • The fact that a date will be set out and put into law is significant
    • However, this does not mean that a coal phase out is implemented in the coalition agreement, the commission will simply make proposals how and in which timeline to achieve a coal phase-out in Germany

Philipp Ruf is Director - EU Carbon & Power Analytics at ICIS. He can be reached at Philipp.Ruf@icis.com

This story has originally been published for ICIS Power Perspective subscribers on 7 February. Our ICIS Power Perspective customers have access to extensive modelling of different options and proposals. If you have not yet subscribed to our products, please get in contact with Neil Dewet (Neil.Dewet@icis.com). 

By Staff Reporter