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• As Europe鈥檚 largest economy, Germany is a key energy hub in the heart of the continent.
• Greenhouse gas emissions have decreased 48 percent since 1990 and Germany aims for climate neutrality by 2045.
• 骋别谤尘补苍测鈥檚 trademark 鈥�Energiewende鈥� 鈥� the country鈥檚 transition to climate neutral and nuclear-free energy supply 鈥� has broad public backing.

• Germany's new coalition government bringing together the conservative CDU/CSU alliance led by chancellor Friedrich Merz and the Social Democrats (SPD) of previous chancellor Olaf Scholz has opted to continue with its predecessor鈥檚 climate and energy policy, without upping the level of ambition. In their coalition agreement, the parties spelled out their policy plans for the next four years, which include a reduction in electricity prices, industry support and infrastructure modernisation. The new coalition has rearranged ministries, and moved the topic of climate out of the economy ministry and back into the environment ministry.

• A rise in support for populist parties might get in the way of pursuing more ambitious climate action, experts have warned. The shift highlights the importance of ensuring climate policies are socially just and that everyone has the possibility to participate in the transition to cleaner transport methods and buildings. [Find more background听in this factsheet on East Germany and the energy transition and in our deep dive into the impact of the rise of populists in power].
• Projections by the country's Federal Environment Agency (UBA) showed that the country is on track towards achieving its 2030 climate targets for the first time, not least thanks to the resolute expansion of renewable energy sources. The government-appointed Expert Council on Climate Change has, however, said that more stringent policies and significant investments are needed. Germany's 2023 Climate Action Programme spells out how the country plans to reach its climate targets by the end of the decade, including the goal to cut greenhouse gas emissions by 65 percent compared to 1990 levels.

Major transition stories

• Historic spending package 鈥� An agreement to unlock hundreds of billions of euros for climate and infrastructure investments has fuelled hope that Germany can get over its structural challenges and . A total of 500 billion euros are earmarked for infrastructure and climate investments over the next 12 years, with 100 billion flowing directly to the Climate and Transformation Fund, a special pot earmarked for energy transition projects. Unlocking the funds required an amendment to Germany's constitutional limit on government borrowing, known as the debt brake. The money will likely go to the modernisation of rail networks, energy grids and water infrastructure. Experts have warned that there are not enough skilled workers to carry out the envisaged modernisations, and that lengthy procurement, permitting and planning procedures, as well as supply bottlenecks, might also mean that .

• Economic woes 鈥� 骋别谤尘补苍测鈥檚 political upheaval is playing out against the backdrop of growing concern about the economy as a whole, fuelled by an ongoing decline of manufacturing activity, a weakening labour market, and mounting worries about the future of the country鈥檚 carmakers in particular. VW, the country鈥檚 largest private employer, .
• Excess emissions 鈥� Germany continues to struggle with high emissions, especially in the transport and buildings sectors. Moreover, demand for electric cars is sluggish: the target of putting 15 million electric cars on the road by 2030 increasingly looks out of reach. Transatlantic turmoil stemming from the new US administration under president Donald Trump adds further uncertainties to German car manufacturers鈥� future.
• Just transition 鈥� What started out with a debate about supporting coal workers in mining regions and state subsidies for so-called 鈥渟tructural change鈥� is increasingly turning into a cross-societal debate about leaving no one behind in the transition to climate neutrality. Installing a heat pump, buying an electric car or dealing with higher fuel costs due to CO2 pricing affects everyone, but low-income households will need more support to manage the changes. A just transition will become a big issue not only in Germany, but across Europe, when the new EU emissions trading system for transport and buildings starts in 2027. The "climate bonus," a scheme that would return some of the revenue from Germany's carbon pricing to low-income citizens, was not delivered during Olaf Scholz's legislative period. The new government said it would support low-income households, but did not give exact details as to how. Think tanks and consumer organisations have long called for financially-tiered support and protection mechanisms.
• Hydrogen economy ramp-up 鈥� Hydrogen is set to form a key part of Germany's net zero future, especially to decarbonise industry and other hard-to-abate sectors, such as chemicals and aviation. The country has taken several steps to ramp up supply and demand, and has a national hydrogen strategy and a hydrogen import strategy. It has also laid the groundwork for building a "core hydrogen network," with hydrogen flowing in its pipelines from 2025 and work set to be completed by 2032.
• Lower future electricity demand 鈥� Due to the sluggish expansion of electric vehicles, heat pumps and hydrogen production, future electricity demand could fall much below initial projections. As a result, renewables and grid expansion plans for the coming years might be oversized and thus costly. The new government has pledged to commission a monitoring review by the summer of 2025, and to regularly check expansion developments.
• Sustainable finance 鈥� In contrast to its reputation as an energy transition pioneer, Germany has been a latecomer in tapping into the potential of compelling banks, insurance companies, fund managers and other financial actors to curtail CO2-intensive projects and fund cleaner alternatives.
• Adaptation听鈥� The latest climate change monitoring report urged Germany to step up its efforts to adapt to the already unavoidable effects of climate change. The country faces a multitude of negative impacts, including prolonged droughts, severe water loss, floods and increasing temperatures. Under the Climate Adaptation Act, it is now legally binding for the federal states and municipalities to draw up climate risk assessments and implement adaptation measures. The Climate Adaptation Strategy, for the first time, contains quantifiable targets to increase preparedness. Germany also has a water strategy and a natural climate action strategy.
• Carbon removal 鈥� Germany's new coalition government is set to introduce a law to enable the capture, transport, utilisation and storage of carbon dioxide (CCS/CCU) for industrial processes where emissions are hard to avoid, as well as for gas-fired power plants. It also considers Direct Air Capture (DAC) as a "potential future technology" to increase negative emissions. A long-term strategy on negative emissions, which was meant to introduce a 2060 target for net-negative greenhouse gas emissions and intermediate targets for technical carbon sinks, did not materialise with the breakup of Olaf Scholz's coalition government in November 2024.

• Electricity supply security and Dunkelflaute events 鈥� Germany plans to hold auctions to support the building of 20 gigawatts (GW) of gas-fired power plant capacity by 2030 鈥� eight GW above the previous government's plans. The plants, which will have to be converted to run on hydrogen or use carbon capture technology, will be needed to stabilise the electricity system amid its transition to 100 percent renewable energy sources, which are intermittent by nature. 骋别谤尘补苍测鈥檚 electricity system remains one of the most reliable in the world amid the expansion of wind and solar, despite the nuclear exit and the fallout from the energy crisis in 2023. Still, Germany will need to expand dispatchable capacity, upgrade grids and leverage consumer flexibility in the transition to clean power to ensure security of supply.

• Raw materials and recycling 鈥� The energy crisis fuelled by Russia鈥檚 war against Ukraine has pushed the dependence on imports of key raw materials high on the subjects for debate in Germany and Europe. Germany now has a circular economy strategy and a . The EU also presented a Raw Materials Act to ensure it has access to critical materials needed for energy transition technologies.
• 'Franco-German engine' 鈥� The European Union faces a multitude of parallel challenges that share the question of how and where it sources its energy in the future. Chancellor Friedrich Merz has pledged to deepen cooperation with 骋别谤尘补苍测鈥檚 western neighbour France in areas including energy policy, competitiveness and technology. Efforts to further integrate internal markets should also include tighter cooperation with Poland, Merz said.
• Climate foreign policy 鈥� Germany is seen as a credible leader in international climate talks despite shortcomings at home, and has hosted the annual Petersberg Climate Dialogue for more than a decade. The new coalition government has reversed the previous leadership's decision to anchor international climate policy in the foreign office, which was meant to highlight the issue's importance, as was the publication of a climate foreign policy strategy. It remains to be seen how the new government treats the international climate negotiations.
• Skills shortage 鈥� Major roadblocks to climate neutrality include a lack of skilled workers needed to implement climate mitigation and adaptation projects, such as renewables expansion, energy efficiency and grid modernisation. The government has reformed immigration laws with the aim of filling tens of thousands of vacant energy transition jobs.

Sector overview

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