Elections in Germany: what future for climate policy in an uncertain political landscape?

The development of renewable energies, a showcase for Germany's energy transition 

Despite the economic slowdown and political uncertainties, the development of renewable energies (RE) has seen an unprecedented acceleration in Germany in recent years. Driven by record growth in solar power (more than 16 GW of capacity connected in 2024), renewables accounted for almost 60 % of electricity production in 2024, doubling their share over the past 10 years.1 Helped by falling consumption and rising net imports (particularly from France)2, the boom in RE has led to a further reduction in the use of coal (-15%), whose share of production is now limited to 21% of the mix. 

However, the goal of achieving an 80% renewable electricity mix by 2030 (and carbon-neutral by 2035) remains highly ambitious. In addition to the unprecedented development of wind and solar power capacity, the success of the electricity transition will depend to a large extent on the speed with which grid infrastructure (electricity and hydrogen)3 is deployed, as well as on increasing the flexibility of the electricity system as a whole (IDDRI, 2024), on both the demand and supply sides (including new dispatchable capacities)4.

Figure 1: Electricity generation in Germany by source between 2000 and 2024 (TWh)

Source: IDDRI, AGEB data (2025)

Figure 2. Electricity generation by source in Germany in 2024 (in %)

Source: IDDRI, AGEB data (2025)

2030 targets under threat

Between 1990 and 2024, Germany halved its greenhouse gas emissions (-48%), a reduction mainly driven by the transformation of the energy sector (-61%). However, the transport and buildings sectors are lagging behind, and are gradually moving away from the trajectory set out in the Climate Protection Act.5

Figure 3: GHG emissions in Germany by major sectors in 1990, 2024 and 2030 targets

Source: IDDRI, Agora Energiewende data (2025)

Two trends illustrate the uncertainty weighing on transition policies in these two sectors: with 380,000 sales, the market for electric vehicles fell by 26% between 2023 and 2024, marking a growing gap with the target of 15 million vehicles by 2030.6 The trend is even more worrying for heat pumps, with a 44% fall over the year in Germany and Europe as a whole.7 In both cases, getting back on track will depend not only on greater political ambition and public funding, but also on improved integration of social justice, by targeting aid on  the lowest-income households, who have been particularly hard hit by the energy and purchasing power crises.8

Energy prices are still high for households and business, despite the slight reductions in electricity and gas prices observed in 2024 compared with the peak of the crisis in 2023. At an average of 41 cents per kWh, electricity prices for households are now 30% higher than in 2021 (and 60% higher than in France), which clearly raises concerns over the attractiveness of electrification measures, despite gas prices themselves being 65% higher than before the crisis.9

The situation improved slightly for German industry, which was very badly affected from 2022 onwards by the surge in gas and electricity prices, which led to significant destruction of demand. In 2024, however, the fall in wholesale market prices and the sharp reduction in all charges and taxes decided by the government in 2023 enabled electricity prices to return to a level slightly lower than before the crisis.10 Gas prices for industry appear to have stabilized at a level 50% higher than in 2021, threatening competitiveness for exposed industries, while reinforcing the relevance of electrification policies.

Unlocking pending green investments 

The delay in decarbonization policies can be linked to the political instability and ongoing debates about balancing the budget, not to mention the drastic effect of the German Constitutional Court's decision in November 2023 to invalidate the Climate and Transformation Fund, removing 60 billion from the budget for decarbonization policies, with major repercussions for support programmes for households and industry. Olaf Scholz's government has nonetheless succeeded in encouraging the design of industrial decarbonization projects–while triggering a new debate on the sharing of risks and funding between public and private actors–which now needs to be turned into reality.

More structurally, there is a strong tension between the––attachment to the debt brake rule (Schuldenbremse)11 and the urgent need for a major public and private investment plan, in connection with the green transition and more broadly the recovery of the German economy, which has been stagnating since 2019. According to the think tank Agora Energiewende, investment needs for the low-carbon transition should average €540 billion a year between now and 2045.12

Hard hit by the energy crisis and economic stagnation, German industry sounded the alarm in 2024, indicating that a fifth of the industry's added value was directly threatened by the loss of competitiveness. Contrary to what might have been expected, German industry–through its powerful federation (BDI)–has not wished to turn its back on decarbonization ambitions. On the contrary, in a recent study, it calls for a new, much more ambitious industrial policy strategy, integrating the energy and digital transition, with an estimated need for additional investment of 1,400 billion between 2024 and 2030, the triggering of which will also largely depend on new public funding schemes.

Given these challenges and the size of the German economy, Germany's funding strategy and political stance will also have a key impact on the negotiations for the EU's next multiannual financial framework (2028-2034), whether in terms of defining sectoral priorities or the ability to set up new joint funding instruments after the NextGenerationEU stimulus fund expires in 2026.

A decisive election for the future of the European Green Deal

The arrival of a new German coalition led by Friedrich Merz and the conservative CDU party could also increase the political pressure on the European Green Deal agenda. 

Firstly, by strengthening the influence of the conservatives of the European People's Party (EPP) in Europe, whose political line is currently leaning more towards an agenda of simplification and a new balance between environmental protection and economic growth in the short term, with an uncertain status for the implementation of the Green Deal.13

But also because the position of the future government could be decisive for the fate of certain key achievements of the Green Deal, such as the ban on the sale of new internal combustion engine cars from 2035 (explicitly rejected in the CDU programme) and the implementation of the carbon border adjustment mechanism.14 This is all the more true given that the EU Commission’s President Ursula Von der Leyen might be more receptive to a Chancellor from her own political party. 

There is one major factor of uncertainty: the German government's position will depend on the negotiations and balance of power within the future coalition (which could take several months to form), and the many differences between the CDU and its potential allies (SPD, Greens) will not make things any easier.15

Reconciling reindustrialization, competitiveness and decarbonization: a new Franco-German project for Europe

The arrival of Friedrich Merz could also reshuffle the cards for the Franco-German couple: a Francophile and supporter of a strong Europe, pro-nuclear and in favour of an agenda focused on simplification in the name of competitiveness, the future CDU candidate seems at first sight an ideal candidate to revive Franco-German cooperation, which has been at a low ebb for several years. 

This would provide an opportunity to define an ambitious strategic vision for Europe, based on the right balance between competitiveness, reindustrialization and decarbonization, with concrete measures to implement the comprehensive agenda of the Clean Industrial Deal (expected on February 26th) and regulatory simplification (the subject of two forthcoming IDDRI papers), focusing on several key areas: 

• reconciling the simplification agenda and the green transition in a pragmatic way, seeking to be more effective while maintaining a high level of ambition;16
• developing a common European industrial policy, taking advantage of the opportunities offered by the race to green industries and equipped with financing instruments that are fit for the challenges;
• defining a harmonized, European approach to guaranteeing preferential access to decarbonized electricity for industrial players, in order to make electrification and decarbonization a key factor in Europe's economic and energy security, building on the many European initiatives in this area;17
• strengthening cooperation on electricity transition by focusing on the challenges of electrification and the development of electricity flexibilities, in line with the Franco-German action plan published in 2024.