German Election #5: The future of Germany’s energy policy

On 23 February 2025, almost 60 million German voters will elect a new federal parliament in snap elections after the collapse of the governing coalition of Chancellor Olaf Scholz's Social Democrats (SPD) with the Greens (B90/Die Grünen) and the Liberals (FDP) in November 2024. A change of government with the participation of the Conservatives (CDU/CSU) and their lead candidate for Chancellor, Friedrich Merz, seems likely. In addition, a spin-off of the Left Party (BSW) will be a new party on the ballot, which has already entered government coalitions in two federal states. Polls show that the AfD will likely emerge from the elections as the strongest opposition party. All other parties have indicated not to enter a coalition with the right-wing party. Irrespective of who wins, a change in the political majorities in Germany is to be expected, which will also have an impact on European and international politics. Freshfields has the latest developments and positioning in view. 

Key Takeaways

1. Germany's ambitious target of achieving climate neutrality by 2045 has lost unanimous support and is being contested. The EU goal of reaching climate neutrality by 2050 remains largely accepted by most parties.
2. Energy production strategies vary, from a full renewable transition by 2035 to a more diversified approach including natural gas and possibly even the reactivation of decommissioned nuclear power plants.
3. All parties agree on the need to mitigate the costs of the energy transition for end consumers. Disagreement exists over the methods and extent of this intervention.

The current energy policy landscape in Germany

Germany’s next government faces significant hurdles in shaping its energy policy. The loss of cheap gas from Russia led to soaring energy costs, which are said to be one of the main drivers of the current economic downturn. While renewable energy continues to make progress and accounted for over 50% of Germany’s electricity consumption in 2024, high installation costs and bureaucratic obstacles remain a concern in their expansion. Much like at EU level, the European Green Deal and the accompanying bureaucratic are facing increasing opposition within the German political landscape. All major parties acknowledge the need for climate action, but opinions differ on the speed and economic implications of decarbonization. 

Climate targets: A shifting consensus

Germany’s ambitious goal of achieving climate neutrality by 2045 — earlier than the EU’s 2050 target — has become a major point of contention. While the SPD and Greens remain committed to ambitious decarbonization timelines, the CDU/CSU state they have the 2045 target "firmly in sight", which might leave a loophole for a potential policy change. The FDP takes it one step further and argues for totally abandoning the national target. 

The CDU/CSU and FDP want to see climate goals aligned with maintaining economic competitiveness. The CDU/CSU advocates for a pragmatic evolution of EU climate legislation, while the FDP directly calls for the abolition of reporting requirements under the Green Deal, including the CSRD, CSDDD, and EU Taxonomy. The SPD remains more reserved on this front, whereas the Greens push for the consistent implementation of the Green Deal, arguing that without it, planning security for businesses could be at risk—a crucial factor for economic stability. As a common ground, all parties support in principle the possibility of achieving climate goals not only by reducing emissions but also by addressing hard-to-abate sectors through carbon capture, with subsequent storage in the seabed or reuse (Carbon Capture and Storage/Utilization).

Energy production: balancing security, affordability, and sustainability

The debate over energy production highlights the parties’ ideological differences. Particularly the Greens emphasize a stronger expansion of wind and solar energy, pushing for a goal of 100% renewable energy production in 2035 supported by subsidies and regulatory incentives. The CDU/CSU and FDP argue for “technological openness” allowing energy providers to decide for themselves which energy source is worthwhile investing, including renewables but also natural gas and potentially even a reactivation of decommissioned nuclear power.

On coal, the Green party pushes for a complete phase-out by 2030, whereas the CDU/CSU supports adhering to the existing coal compromise, which sets the end of coal-fired power generation for 2038. Decentralized energy production through communal energy-sharing initiatives and energy cooperatives is promoted by the SPD, BSW, and the Left Party. A significant amount of electricity will also be needed to scale up the hydrogen economy, a goal shared by all parties. The CDU/CSU, SPD, and Greens even advocate for establishing pioneering markets where mandatory quotas for green steel would be introduced, for example by leveraging the state's bargaining power in public procurement contracts.

Subsidies and incentives: Who pays for the green transition?

The costs of the energy transition remain a key challenge and passing them directly onto consumers has proven politically sensitive, as the controversy surrounding the so-called “Heating Law” to reform the Buildings Energy Act (GEG) demonstrated. CDU/CSU, FDP, and BSW are now calling for it to be repealed, while only the Greens actively support keeping the law in place.

Despite their differences, all parties agree that consumers should not bear the costs of the energy transition alone, though they diverge on how to structure financial relief. Regarding rising CO2 prices, CDU/CSU wants price relief for both consumers and businesses, while the Greens prioritize lower- and middle-income households. The SPD advocates a “climate compensation” scheme specifically for heating and fuel price increased by higher CO2 prices from 2027 onwards, while the FDP favours redistributing emissions trading revenues as direct transfers to everyone. In terms of subsidies under the Renewable Energy Sources Act (EEG), the FDP calls for phasing them out earlier than foreseen and transitioning renewable energy fully to the free market. Meanwhile, all parties support lowering grid fees while CDU/CSU, SPD and the Greens also advocate for reductions in electricity taxes. 

Outlook

Whether the next government will succeed in balancing climate action with economic development seems pivotal not only for the energy transition but also for Germany's broader economic future. As ambitious national climate goals face increasing scrutiny, the decisive continuation of the energy transition will also depend on whether its costs for consumers can be effectively mitigated by the state. The scope for government action in this regard will heavily depend on a potential reform of the debt brake. Despite significant differences in energy policy, all parties acknowledge the need for decisive action. 

You can find more in our overview of the election manifestos on energy and climate (English version/German version). This blog post is part of our German Election Supercycle series.

Co-Author: Niklas Hauser, Public Affairs Germany research assistant