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19 September 2019

What is the Cli­mate Ac­tion Pro­gramme 2030?

The Climate Action Programme 2030 consists of a package of far-reaching and coordinated measures. These include incentives to promote climate-friendly behaviour and investment, clear rules, and carbon pricing in the transport and building sectors. The programme also creates an obligation to continually review whether climate targets are being met. As a result, the Climate Action Programme is socially equitable, environmentally effective and economically viable.

Hands handing over a globe
Source:  istockphoto
  • The German government is making sure that Germany will reach its climate targets for 2030. The Climate Action Programme, which was agreed on 19 September 2019, will ensure that happens.
  • The Climate Action Programme 2030 makes Germany’s climate policy more binding than ever before: the Climate Action Act ( Klimaschutzgesetz ) will, for the first time, give our national climate targets the status of law. The Climate Action Act will also introduce a continuous review of climate targets, with clear responsibilities for the individual sectors and obligatory adjustments if a particular sector is not on course to reach its targets. We are creating a safety net that will ensure we reach our goals on an annual basis.
  • The Climate Action Programme expands on the planned phasing-out of coal-fired electricity generation by 2038 at the latest. In this way, we are laying the foundations for Germany to be carbon-neutral by 2050.
  • In order to immediately create better incentives for climate-friendly behaviour and investment, we are setting up new support programmes and adapting existing programmes in important areas. The government itself will also make investments. The resources allocated to the climate package will amount to €54bn in the next four years alone, in the period up until 2023.
  • Over time, the support will be increasingly accompanied, and partly replaced, by clear rules (regulatory framework). This combination will allow us to achieve the best possible impact for the climate. At the same time, it will allow us to ensure that public funds are used efficiently.
  • Complementing this, the German government is also introducing carbon pricing in the transport and building sectors. We are assigning a gradually increasing price to harmful CO2. We are deliberately doing this in such a way that everyone will be able to cope, including people on low incomes. During the 2021–2025 period, emissions allowances will be issued at a moderate fixed price which will increase each year. In practice, this will function as a tax. Having a fixed price ensures planning certainty and means that the burden is controllable. In 2026, an auction of the certificates will take place, where a minimum price and an ambitious maximum price will be set. In 2025, the German government will decide on the specifics of the national emissions trading scheme as of 2027, because it will have gained regulatory experience with this tool by that time. In the long term, the German national scheme will be incorporated into the European emissions trading system. All of the revenue from carbon pricing will be reinvested in climate-related measures or returned to taxpayers. The latter will happen in particular through lower electricity prices, an increase in the commuter allowance for people commuting long distances, and measures that benefit individuals receiving housing benefit.
  • By taking a long-term approach, we are giving both individuals and companies time and opportunity to make their everyday activities more climate-friendly. Few people can afford bigger investments such as a new car or a new heating system at short notice. We want to ensure that when people make their next investment decision, they choose a climate-friendly product.
  • By 2030, at least 65% of electricity must be generated from renewable resources such as wind and solar power. The expansion of renewable energy goes hand-in-hand with the phasing-out of coal. At the same time, electricity generated from renewables must be made cheaper, so that it has a fair chance to compete with energy from fossil fuels in all sectors.
  • The Climate Action Programme 2030 means that Germany will fulfil its responsibilities under the Paris Agreement. We are taking steps today towards a climate-neutral society. At the same time, we are modernising our country by means of a comprehensive investment programme which will benefit industry and workers in the coming years.

Only by taking far-reaching measures can we limit anthropogenic climate change and preserve the foundations of life for our children and grandchildren. Germany has entered into international commitments towards these goals, and they are also a key priority of the current German government.

On 19 September 2019 the dedicated cabinet committee on climate action (known as the “climate cabinet”) launched a comprehensive Climate Action Programme. It means we are now taking the necessary steps to reach the internationally agreed climate targets for 2030, namely a reduction of greenhouse gas emissions by 55% compared with 1990 levels. We are creating a system that comprises a binding legal framework, support instruments, regulatory provisions and carbon pricing. Thus, the whole spectrum of the climate and industrial policy toolbox is being used, rather than limiting it to individual measures or areas.

It’s clear that taking steps to protect the climate doesn’t come for free. But in the long term, not taking action would be significantly more expensive – both for the government budget and for ordinary citizens. For this reason, it is a key priority of the German government that we reach our climate targets in a socially equitable way, just as we did with the decisions on phasing out coal mining. Up to €40bn will be made available in the coal mining regions for the long-term organisation of the necessary structural changes in the period until 2038, creating new prospects of employment and value creation. This will happen before the end of electricity production from coal.

From an economic perspective, too, the Climate Action Programme 2030 makes sense. Through targeted support and market incentives, it will help Germany to build on its position as an innovative leading provider of climate-friendly technology and a lead market for this technology. German-made carbon-neutral technology will represent an important contribution to global climate action and will further enhance Germany’s strength as a major exporter of cutting-edge technology. We are also supporting German industry in relation to the necessary structural changes.

The four elements of the Climate Action Programme

For the first time, we are implementing a coordinated system in which a range of tools and measures interact smartly and are, as a result, much more effective than the sum of individual actions. It consists of four central components:

  • The first component is a comprehensive programme of measures which will create incentives to reduce CO2 emissions. The specific measures that have been agreed will ensure significant reductions in the individual sectors (in particular, transport, buildings, industry, energy and agriculture). The measures include public investment, comprehensive support programmes and tax instruments.

    Some of the key measures include:

    • Binding phase-out of coal mining by 2038 at the latest.
    • Expansion of renewables so that they account for 65% of electricity production by 2030.
    • Enhancement of the role of landlord-to-tenant electricity (locally produced electricity which is not transported via the public grid) and of storage capacity, which is key to the energy transition.
    • Expansion and extension of the premium for the purchase of electric cars and reduced taxation of electric company cars, with the goal of increasing the number of electric cars to between 7 million and 10 million within the next 10 years, especially more affordable electric cars.
    • Expansion of the charging infrastructure for electric cars with the goal of having 1 million charging stations by 2030.
    • Cheaper train tickets by reducing the rate of VAT to 7% (making rail travel 10% cheaper) while at the same time increasing the rate of tax on airline tickets.
    • More federal funding for public transport on the local authority level (buses and underground trains). In addition, increasing the number of cities with affordable annual public transport tickets and more money for cycle paths in general.
    • Tax incentives for the refurbishment of buildings to increase energy efficiency, including for smaller-scale modernisation measures such as installing new energy-efficient windows or insulating roofs and external walls.
    • Support for replacing heating systems and switching to climate-friendly heating from renewable sources. National decarbonisation programme for industry and a move to a hydrogen economy.
    • Protection of soils, forests and moors to safeguard their role in storing CO2.

All the above measures create massive incentives to reduce harmful CO2 emissions quickly. The financial resources allocated to these measures will total around €54bn between 2020 and 2023. The Energy and Climate Fund will continue to be the main instrument for financing the energy transition and climate action measures in Germany.

The expansion of renewable energy so that it accounts for 65% of electricity production is a precondition for the success of Germany’s energy transition. To ensure we reach this target, we have eliminated the current restrictions on photovoltaic capacity in Germany. The target for the expansion of offshore wind energy has been increased to 20 gigawatts by 2030. In order to increase acceptance of onshore wind energy, local authorities will in future be able to obtain a financial stake in the operation of wind turbines. In addition, we have agreed on a 1,000-metre minimum distance between wind turbines and housing. Länder (states) and local authorities that wish to do so can permit smaller minimum distances (“opt out”) and will receive additional financial benefits as a result. We will create further incentives for the expansion of wind energy in the south of Germany.

  • With these incentives, the German government wants to encourage businesses and individuals to make their actions more climate-friendly. But it is also clear that incentives alone will not be enough. Hence the government will complement the incentives with binding higher environmental standards, in a second step. Under this second component, we will accompany and gradually replace the comprehensive support programme with a regulatory framework. In this way, we are providing individuals and businesses with reliable long-term guidance which will allow them sufficient time to adjust to the new rules.

    This combination of support and a reliable long-term regulatory framework will make it feasible for businesses and individuals to implement measures that will protect the climate. Our goal is to ensure that, when the time comes to buy a new car or install a new heating system, consumers will choose an environmentally friendly product.

    Some important combinations of support and regulations include:

    • Support will be provided for replacing heating systems, but in most cases it will no longer be permitted to install oil central heating from 2026 onwards.
    • There will be tax breaks, among other things, for the refurbishment of residential buildings to make them more energy-efficient, but it will also be obligatory to obtain energy-related advice when there is a change in ownership, for example.
    • Publicly accessible charging infrastructure for electric cars will be supported, but there will also be coverage requirements, and where the market does not provide adequate coverage, electricity grid operators will be given the possibility of setting up charging stations.
    • Private charging stations in multi-family housing will be supported by tax breaks for installation costs, but landlords will also be obliged to tolerate tenants installing charging infrastructure.
    • Rail travel will be made cheaper and domestic flights more expensive, but airlines will also be prohibited from selling flights for less than the amount of applicable taxes, charges and fees.
    • Wind and solar power will be massively expanded, but local authorities will be able to obtain a better share of the proceeds.
    • Measures will promote a reduction in the use of nitrogen in agriculture, but fertiliser legislation will also be amended.
    • A national decarbonisation programme for industry will be created, but EU minimum standards for eco-design will also be expanded.
  • As a third component, we are introducing carbon pricing, with the aim of reducing CO2 emissions from heating and cars and spurring innovations in low-carbon technologies. The pricing is not intended to generate public revenue for other purposes. Therefore, all additional revenue from carbon pricing will be reinvested in climate action measures or returned to taxpayers.

    We have agreed to issue emissions allowances for the 2021–2025 period at a moderate fixed price, which will rise annually from €10 per tonne of CO2 in 2021 to €35 per tonne of CO2 in 2025. The fixed price, which will function like a tax in practice, will ensure planning certainty, and the burden will be moderate. In 2026, an auction of certificates will be held where the price will range from a minimum price of €35 per tonne of CO2 to an ambitious maximum price of €60 per tonne of CO2. In 2025, it will be determined to what extent maximum and minimum prices for the period beginning in 2027 are appropriate and necessary, on the basis of the regulatory experience that will have been gained with this instrument by then. In the long term, the German national scheme will be incorporated into the European emissions trading system. The revenues will be completely reinvested in climate action measures or returned to taxpayers.

    It is important that we raise carbon prices incrementally and that we already fix the size of the individual increments today. This allows individuals and companies to plan for the transition and ensures that they are not subjected to excessive financial burdens. For this reason, at the same time that we are introducing carbon pricing, we will also support individuals by reducing the levy charged on electricity consumers to promote renewable energy sources by €1bn each year. This will help families and people on low incomes in particular. If revenue from carbon pricing increases, electricity prices will be further reduced. In addition, we are limiting the increase in costs for workers who live a long way from their place of employment, by increasing the commuter allowance for long-distance commuters to 35 cents per kilometre for distances of 21 kilometres or more. Finally, we are raising housing benefit and taking measures to ensure that carbon prices are not completely passed on to tenants, given that they have only a limited influence on their heating costs.

    This comprehensive and ambitious package of measures, comprising investments, support programmes, regulatory provisions and carbon pricing, is designed to allow us to reach our climate targets. Our goal is to inject new momentum into the process, in order to support climate-friendly technology and behaviour. However, it is difficult to predict what CO2 reductions will result from these measures. That depends on the extent to which the (desired) changes in behaviour actually take place. It is not possible to predict exactly how many people will use certain support programmes, for example, or what effect increasing the price of CO2 emissions will have on consumption and investment behaviour.

  • For this reason, the German government is committing itself, as a fourth component, to continuously reviewing whether the climate targets are being met. Each year, the government will determine the extent to which the 2030 climate targets are being adhered to, as well as assessing progress in individual sectors. An external body of experts will support the government in this task. In this way, the government will ensure objectivity in assessing whether climate targets are being reached. The German government will set up the “climate cabinet” on a long-term basis and assign it the task of annually reviewing the effectiveness, efficiency and targeting of the measures introduced. If a particular sector is not complying with its statutory targets, the ministry with lead responsibility will present the climate cabinet, within three months of the emissions data being confirmed, with an immediate action programme that will make appropriate adjustments. On this basis, the climate cabinet will decide how the Climate Action Programme 2030 should be jointly adapted to ensure that the underlying targets are reached.

Conclusion

With the Climate Action Programme 2030, we are living up to our responsibility to protect the climate in Germany in a way that is socially equitable, ecologically effective and economically viable. It sends a clear signal: each and every person will be able to deal with the transition, even if they have lower incomes. For this reason we have opted for a coordinated mixture of support programmes, price incentives and regulatory provisions. In the coming years, there will be great opportunities to switch to climate-friendly options: the focus for individuals is on the next car they buy or the next heating system they install. For businesses, the focus is on their next investment, the next process innovation or the acquisition of their next company cars. For local authorities, it has to do with their next public transport decision or the next development of a neighbourhood. For the Länder , it's about their next decision on the electricity grid or the next wind farm. The 2020s will be the decade of the energy and mobility transition. One thing is clear: in the long term, only activities that do not exploit the climate will yield a profit.