It is not only here in Latvia that uncertainty surrounds the implementation of environmental policy requirements and the consequences of the changes ahead. Fears about the (non-)fulfilment of climate targets have created a string of problems, since there is a real possibility that Latvia will have to pay enormous fines if these commitments are not met…

Germany, Europe's most powerful economy, also faces a highly unclear scenario for how the situation will develop. “The new government's coalition agreement is too vague in the field of climate policy to ensure that emissions reduction targets are met,” the country's Expert Council on Climate Change has warned. The climate action programme, which by law the cabinet led by Chancellor Friedrich Merz is obliged to submit by March 2026 at the latest, should show how those targets are to be achieved.

Germany's leading climate experts have stated that the new government's climate policy plans, as set out in the coalition agreement, are unlikely to be sufficient to cut emissions in line with climate targets. To avert the projected shortfall, the experts called on Merz's government to submit an appropriate climate action programme.

The Expert Council on Climate Change assumes that the policies promised so far will deliver no improvement compared with existing policy, and could even increase emissions slightly, depending on how the plans are implemented. “The coalition agreement provides no significant impetus towards meeting the 2030 climate target,” said the council's co-chair Brigitte Knopf.

The council named the most important issues requiring attention: the transport and construction sectors and the introduction of the new EU emissions trading system in those sectors (ETS 2); the failure to meet several EU and national long-term climate targets; and how to act now that Germany's land use, land-use change and forestry sector (LULUCF) has become a net source of carbon emissions and is likely to remain one in future.

The German government has set out a steady but cautious course on climate and energy policy, committing to meet the current EU targets but showing little appetite for exceeding them. The coalition agreement provides for the country's energy transition to continue without substantial changes, although the text of the agreement lacks detail on future policy and specific measures.

“The coalition agreement does not clearly mention the key problems identified by the Expert Council on Climate Change, and on many other questions too the text of the agreement is vague,” Knopf notes. Under the coalition's current climate plans “there is a risk that the 2030 targets will not be met and that the 2045 climate neutrality target will become unattainable. ... These questions must be addressed in a broad climate action programme, which the leadership must submit within the first 12 months of the legislative period, that is, by the end of March 2026,” the council's report states. The relevant ministries must submit their first proposals for measures as early as September 2025.

The council once again urged the government to reinstate the so-called “climate cabinet”. This group of ministers, responsible for the main climate-related policy areas – from the economy to transport and finance – should resolve conflicts over priorities and ensure that the country makes use of mutually beneficial policy decisions.

The Expert Council on Climate Change is tasked with assessing each year the emissions data and projections provided by the environment agency (UBA). The agency announced in March that Germany will not meet key short-term climate targets set by the EU unless the government introduces more effective measures and policies to cut emissions, particularly in the transport and construction sectors. The experts have confirmed the agency's figures.

The think tank Agora Energiewende has said that missing the EU targets by 2030 could cost Germany 13-34 billion euros, as the government will have to try to buy emission allowances from other EU member states that exceed their own climate targets.

The government must introduce a German minimum CO₂ price

The European Union is currently introducing a new emissions trading system (ETS 2) in the transport and construction sectors, which will come fully into force at the start of 2027; the EU may still decide to postpone it by a year, an option supported by some EU countries.

Experts warn that when the new system takes effect, consumers across the EU may face price rises at filling stations and in household heating bills. Member state governments are being urged to raise the ambition of their climate targets – the more heat pumps replace gas heating systems, the fewer emission allowances will be needed, and the lower the CO₂ price will be. There are calls to develop support policies for less well-off households so as to bring them into the energy transition.

“ETS 2 is not a guaranteed success,” Knopf said at a press conference. “At European level it is under pressure. The German government must work to ensure that the system really does start operating in 2027.”

Since Germany already has a national carbon price for these sectors, the expert council pointed to the existing possibility that it will in effect fall in the period up to 2027, when the country switches to the EU system. To avoid a price drop, the report proposes setting a national minimum price. “This would stabilise the overall price in Europe and reduce the risk of prices rising sharply under the EU ETS 2 system,” the report states.

The government must set out what it plans to do to ensure climate neutrality is achieved by 2045

The experts called on the government to focus on closing the gaps in meeting long-term climate targets. The report states that Germany will fall considerably short of its emissions reduction targets for 2040 and will also be unable to achieve climate neutrality by 2045. The coalition agreement does not address this question.

Germany's forests and wetlands are a substantial problem. The current climate law provides that the LULUCF sector must make a significant contribution to cutting emissions by the middle of the century, balancing out unavoidable residual emissions, for example from agriculture. The projections in this area are bleak. The great drought of 2018 and the years that followed caused many trees to die, as a result of which Germany's forests became a net source of CO₂ emissions. The report stresses that it is still unclear whether Germany's forests could be made net carbon sinks again.

Drained peatlands have been a net source of emissions for some time, which is why measures are being taken to rewet them. To meet the emissions targets set for the LULUCF sector, “the focus must be on both forestry and peatland emissions”, said Oliver Geden, a researcher at the German Institute for International and Security Affairs (SWP).

Alongside natural carbon sinks, technical sinks must also be developed. The experts noted that technologies for capturing carbon from the atmosphere and storing it permanently are needed in order to achieve greenhouse gas neutrality by 2045, but warned that reaching the target should not rely too heavily on negative emissions, because “in some cases the technologies concerned will not be rolled out that quickly”.

Experts take a critical view of the use of international carbon credits

The German government has said that, in order to meet the planned EU 2040 climate target, it should be permitted to count CO₂ reductions achieved outside the EU towards the national balance. Offsetting emissions reductions abroad with international CO₂ certificates would, however, create problems, such as “a lack of quality and availability”, the experts judged. “We take a critical view of this proposal,” said Brigitte Knopf.

Objections from several member states to the European Commission's proposal to cut emissions by 90% by 2040 have triggered a debate about allowing international carbon credits, which could make the target easier or cheaper to reach. The European Commission is expected to bring forward a legislative proposal shortly. In February 2024 it already proposed a target of cutting emissions by 90% by 2040 compared with 1990. This was based on the EU's independent scientific council's recommendation to set a target of 90-95%.

Member of the European Parliament Michael Bloss (Greens) criticised the plans to allow international carbon credits to be used towards the EU's 2040 target, arguing that such an approach could slow down necessary climate measures, such as scaling up green hydrogen production.

Climate activists called on the government to take “bold steps”. “With the summer drought approaching, the expert council on climate confirms what we already know: Friedrich Merz and his government need to surpass themselves and change the pace of climate action,” said Linda Kastrup of “Fridays for Future”.

Climate Alliance Germany policy head Stefanie Langkamp, with low- and middle-income people in mind, called for differentiated (income-dependent) funding programmes for heating using renewable energy, for energy-efficient building renovation and for small electric vehicles, as well as for consideration of expanding public transport and the rail network: “Only in this way can the German federal government ensure affordable and environmentally friendly living and travel for everyone.”

The renewable energy sector association BEE sees an opportunity to strengthen innovation and green technologies. “The government sets the direction of energy and climate policy; these projections must be taken seriously and climate action used as a stimulus for innovation and the economy for technologies “made in Germany”,” explained BEE president Simone Peter.