The Climate Path Forward Under Germany’s New Government

in Japanese

Germany’s new federal government is a coalition between the center-right Christian Democratic Union/Christian Social Union (CDU/CSU) and the center-left Social Democratic Party of Germany (SPD). Led by Chancellor Friedrich Merz (CDU), the government now faces the task of advancing Germany’s ambitious climate and energy transition goals under new political and economic conditions.

The most important point is that the new government continues to uphold three core pillars of Germany’s climate and energy policy: (1) achieving carbon neutrality by 2045, (2) phasing out nuclear power, and (3) completing the coal phase-out by 2038.

At the same time, there are concerns that the transition away from fossil fuels may slow in some areas, warranting close attention to future developments.

Still Keeping to Ambitious Climate Goals

Despite changes in leadership, the countries’ climate goals remain unchanged. Germany pledges to keep to the Paris agreement and to achieve climate neutrality by 2045. These commitments were explicitly reaffirmed by Chancellor Merz in his first official address to the Bundestag, Germany’s federal parliament, on May 14th 2025, where he stated:¹

“We will continue to adhere to our national, European, and international climate goals. (Wir halten an den nationalen, europäischen und internationalen Klimazielen fest)“

This clear political endorsement provides stability and international reliability. It signals that Germany will remain a driving force for global climate action, regardless of party constellations.

Environment Minister Carsten Schneider (SPD) has complemented this message by announcing a comprehensive climate action program to be presented by the end of 2025². As required under Germany’s Federal Climate Change Act, the program will outline updated measures to ensure progress toward the 2030 and 2045 targets. It is expected to cover all major sectors and strengthen existing efforts, including in transport and buildings, where emissions reductions have proven particularly challenging in recent years.

However, the coalition agreement³ introduces nuanced positions that warrant close observation. While supporting the EU's 2040 climate target of a 90% reduction in greenhouse gas emissions compared to 1990 levels, the coalition agreement stipulates that:

• Its national reduction efforts should not exceed the German targets already set for 2040 (88%)
• Up to 3% of the 2040 EU target can be met through high-quality, certified, and permanent CO₂ reduction projects in non-European partner countries
• In addition to prioritizing domestic emissions reductions, permanent and sustainable negative emissions (CCS) may be counted to a limited extent

These provisions suggest a slightly changed approach to international carbon credits and negative emissions. While they offer flexibility, it's crucial to monitor how these mechanisms are implemented to ensure they contribute effectively to genuine emission reductions.

Stronger Shift to Market-based Mechanisms

The new German government is adjusting the instruments used to achieve their climate targets. One of the most notable shifts is a stronger emphasis on market-based mechanisms, particularly carbon pricing, as the central pillar of climate policy.

Chancellor Merz underlined in his government declaration that climate protection must remain compatible with competitiveness, calling carbon pricing "the most essential instrument" to reach the climate goals¹. The coalition agreement³ emphasizes this by reaffirming Germany’s commitment to the European Emissions Trading System and national CO₂ pricing, with revenues to be reinvested into the economy - to relieve households, support businesses, and fund clean innovation. This strategy has the goal of aligning economic planning with climate neutrality.

Nuclear Power: No Turning Back

During the 2024 election campaign, discussions emerged within the CDU/CSU about potentially revisiting Germany's nuclear energy policy. However, the new government has firmly closed this chapter. In her first major public appearance as Minister for Economic Affairs and Energy, Katherina Reiche (CDU) addressed the topic directly at the Ludwig Erhard Summit⁴ on May 9th 2025, which is a prominent annual gathering of political and business leaders.

"The [nuclear] phase-out is complete (Der Ausstieg ist vollzogen)”

A return would require not only money but also the trust of the companies that would have to implement it. She further noted the significant skepticism within the country, suggesting that private investment in nuclear power is unlikely due to concerns about the longevity and stability of such a policy shift. Reiche concluded that the opportunity to invest in nuclear energy is in the past, and the focus should now be on expanding renewable energy and transitional technologies.⁵

Stance on Coal Phase-out and Gas-fired Power Plants

The coalition agreement confirms the already existing coal phase-out by 2038³. However, as part of its energy strategy, the new German government is placing increased emphasis on natural gas as a bridging technology.

In February 2024, the previous government already announced in its “Kraftwerksstrategie” (Power Plant Strategy)⁶ a plan to tender up to four capacity packages, each totaling up to 2.5 GW of hydrogen-ready gas-fired power plants. In contrast, at the Ludwig Erhard Summit in May 2025, the new government’s Minister for Economic Affairs and Energy, Reiche, expressed the intention to construct up to 20 GW of new gas-fired power capacity by 2030.⁷ This significant build-out, also included in the 2025 coalition agreement³, is designed to ensure grid stability and supply security during the transition away from coal and nuclear, especially considering growing shares of variable renewable energy. Besides the increase in scale, a notable policy shift lies in the explicit possible integration of CCS for future gas power plants. While the previous government largely limited CCS to industrial sectors with unavoidable emissions, the current coalition plans to broaden its possible use, including in power generation.

From a climate policy perspective, this expansion raises important questions. While flexibility and dispatchability are essential for a renewable-based power system, large-scale investments in new fossil power plants carry the risk of long-term emissions lock-in, especially if hydrogen conversion or CCS deployment proves slower or less scalable than anticipated.

Nevertheless, the German government maintains that energy reliability, affordability, and emissions reduction must proceed hand in hand. The coming years will be crucial in determining whether gas-fired power can genuinely serve as a short-term enabler of the transition—or whether it risks becoming a long-term obstacle.

Revision of the Building Energy Act

The previous government revised the Building Energy Act (Gebäudeenergiegesetz, GEG) to accelerate decarbonization in the heating sector by introducing a clause requiring new heating systems installed from 2024 to use at least 65% renewable energy.⁸ From the outset, the revision triggered heated public debate, driven by a lack of clarity regarding government support for households, widespread misinformation, and politically motivated criticism.

The new coalition government formed in 2025 has announced its intention to abolish this clause in its current form. However, it does not intend to abandon the goal of building decarbonization; instead, it plans to introduce a different, simplified version with the hope of greater public acceptance.

As of May 2025, the GEG and its heating-related provisions introduced under the former government remain in effect. In the coming months, attention will turn to how the new government plans to revise these rules and advance decarbonization in the building sector.

Financing

Finance Minister Lars Klingbeil (SPD) emphasized in his budget speech in May 2025⁹ that a stable and forward-looking economy is essential. He presented his financial policy as a foundation for both modernization and ecological transformation. A central instrument in this effort is the “Sondervermögen Infrastruktur”, a special off-budget infrastructure and investment fund established in March 2025 and that is part of the coalition agreement. The fund amounts to €500 billion and represents the most ambitious modernization program in decades. Exempt from the constitutional debt brake, it is set to finance key projects over the next twelve years, focusing on infrastructure, and renewable energy. Notably, €100 billion of this fund is allocated to the Climate and Transformation Fund (KTF), underscoring the government’s commitment to achieving climate neutrality by 2045.¹⁰

Conclusion

In conclusion, Germany’s new government under Chancellor Friedrich Merz enters office at a time of complex challenges - balancing climate ambition, energy security, economic resilience, and increasing geopolitical difficulties.

It is encouraging that the country continues to uphold its ambitious climate commitments, both nationally and internationally. At the same time, certain developments warrant close attention, as the coming months will reveal how firmly the government stays on course in driving the energy transition.