Dentons

On May 11, 2021, the Federal Government presented the draft of the first law to amend the Federal Climate Protection Act from 2019. It thereby responds to the decision of the Federal Constitutional Court of March 24, 2021 (1 BvR 2656/18 et al.), which declared parts of the Federal Climate Protection Act 2019 to be unconstitutional and mandated the legislature to make amendments by the end of 2022 (see Dentons’ report here). The draft serves to implement the requirements of the Federal Constitutional Court and takes into account the new – negotiated but not yet agreed – European climate targets.

Substantial increase in national climate protection targets

For the year 2030, the draft law provides for a gradual increase in the national climate protection target from previously 55% to at least a 65% reduction compared to the base year 1990 (section 3 para 1 no. 1 Federal Climate Protection Act 2021-draft). The increase is intended to enhance climate protection in the short to medium term. In doing so, it also meets the requirement of the Federal Constitutional Court not to shift the greenhouse gas reduction burden (see Art. 20a of the German Constitution) to future generations in a disproportionate way. At the same time, the anticipated increase in the European climate targets for the year 2030 from at least 40% to at least 55% is taken into account. 

In the year 2040, for which the Federal Climate Protection Act 2021 draft sets out a first-time climate target, a reduction of at least 88% is to be achieved (section 3 para 1 no. 2 Federal Climate Protection Act 2021-draft). The Federal Constitutional Court had declared the lack of an update of the reduction targets for the periods from 2031 onwards to be unconstitutional.

According to the new section 3 paragraph 2 sentence 1 Federal Climate Protection Act 2021-draft, net greenhouse gas neutrality is to be achieved by 2045. Net greenhouse gas neutrality describes an equilibrium between anthropogenic greenhouse gas emissions and their degradation through reductions (see section 2 no. 9 Federal Climate Protection Act 2019). Previously, it was targeted only for the year 2050 (see section 1 sentence 2 Federal Climate Protection Act 2019). The draft law stipulates that now after 2050 negative greenhouse gas emissions should be achieved (section 3 paragraph 2 sentence 2 Federal Climate Protection Act 2021-draft).

Ambitious adaptation of the sector objectives

For the sectors listed in section 4 paragraph 1 sentence 1 Federal Climate Protection Act 2019 (energy, industry, transport, buildings, agriculture, waste management and other), the annual emission targets for the years 2023 to 2030 as specified in Appendix 2 are adapted. The aim is to ensure that the new national climate protection target of at least 65% by 2030 (see above) is achieved. The outstanding annual sector targets for the years until 2045 will be determined through Federal Government directives (in 2024 for the years 2031 to 2040 and in 2034 for the years 2041 to 2045).

The directives have to take into account the cross-sector annual reduction targets for the years 2031 to 2040 as regulated for the first time in the new Annex 3 to the Federal Climate Protection Act 2021-draft. Annex 3 sets forth a “linear reduction path” for total emissions from 67% in 2031 to 88% in 2040 compared to the base year 1990. To regulate the annual reduction targets for the years 2041 to 2045, the Federal Government has to submit a legislative proposal by 2032 at the latest.

The energy sector has to make a disproportionate contribution compared to the other sectors. Its sector target for 2030 will be reduced by over a third from the current 175 (see Annex 2 to the Federal Climate Protection Act 2019) to 108 million tonnes of CO2-equivalent in the future. In relation to the annual emission volume of 280 million tonnes permitted for 2020, this means a reduction of over 60%.

Amplified climate protection contribution of the Land Use, Land Use Change and Forestry Sector (LULUCF)

The newly created section 3a Federal Climate Protection Act 2021-draft contains specific targets for improving the emissions balance of the LULUCF sector. By the year 2030, at least minus 25, and by the year 2040 at least minus 40 million tonnes of carbon dioxide equivalent should be achieved. The increased obligation of the LULUCF sector, which has to be balanced with the preservation of biodiversity and food security, is justified by its influence on climate change (see printed paper 411/21, p. 16). Not only does the sector cause greenhouse gas emissions, most natural ecosystems can also capture CO2 from the atmosphere. However, only the permanent binding of CO2 in organic form contributes to limiting climate change. A continuous CO2 binding is essential in order to achieve the greenhouse gas neutrality aimed for by 2045 (see above). This is because with the currently available emissions reduction options, it is impossible to reduce emissions to zero across all sectors. On June 10, 2021, the Bundestag debated the draft amendment to the Climate Protection Act (19/30230).

Strengthening the Expert Council on Climate Issues

The draft law also provides for a strengthening of the Expert Council for Climate Issues (see section 11 et seq. Federal Climate Protection Act 2019). Pursuant to section 12 paragraph 3 sentence 1 no. 1 Federal Climate Protection Act 2021-draft, the Federal Government will in future require the opinion of the Expert Council for any redefinition of the permissible annual emissions. From 2022 onwards, every two years the Expert Council shall present its expert opinion on developments in greenhouse gas emissions and the effectiveness of the measures employed (section 12 paragraph 4 Federal Climate Protection Act 2021-draft).

Climate Pact Germany

According to the Federal Environment Ministry, a “balanced combination of incentives, rules and funding from the federal budget” is required for the concrete implementation of the goals set out in the Federal Climate Protection Act 2021 draft. As a first step, the Federal Cabinet presented the “Climate Pact Germany” with the accompanying resolution of May 12, 2021. The climate pact provides for an emergency program 2022 to be submitted to the Federal Government in the next few weeks with “quickly effective and highly efficient measures”. The focus will be on climate-friendly production, the accelerated ramp-up of the hydrogen economy, renovations in the building sector and climate-friendly mobility. Up to €8bn will be made available for the measures.

In addition to sectoral measures in the emission sectors defined by the Climate Pact (including the energy industry, renovations in the building sector, industry), the Immediate Action Program 2022 also includes overarching measures to help achieve the newly set climate protection targets. Some measures are listed below as examples:

Energy sector

In the energy sector funding is to be provided for the expansion of offshore electrolysers for the production of green hydrogen at sea. Calls for a subsidy program for the electrolysis of hydrogen at sea had up to now been rejected by the Federal Ministry of Economics. The first area tenders are to be held this year or next. The intended subsidy is to run for a period of five years until 2027. The subsidy is also to be linked to generation volumes.

Building sector

In the building sector, the German government plans to subject the Building Energy Act to a review and, if necessary, amendment in early 2022. To this end, the draft of the emergency program envisages that the regulations for the insulation of buildings will be tightened. In the future, newly built houses will have to save more energy. The so-called Efficiency House ("EH") 55 would thus be made the standard for all new buildings from 2023. From 2025, a further tightening is expected. The so-called EH 40 standard would then apply. New buildings may then only consume a maximum of 40% of the energy of a standard building. Until now, building owners have been free to achieve this standard. In addition, an obligation to install photovoltaic or solar thermal systems is to be introduced for all new buildings and for major roof renovations.

Industrial sector

The immediate action program places great emphasis on the transformation of the industrial sector. In this area, the German government wants to create investment cost support programs for plants for climate-neutral steel production and projects (including plants) for GHG-neutral chemical production (electrification of manufacturing processes, closing of carbon cycles, substitution of fossil raw materials with renewable raw materials). In addition, the German government also wants to further increase energy efficiency in the industrial sector. To this end, the subsidy rate for the use of off-site waste heat (district heating) provided for in the "Federal support for energy efficiency in industry" program will be increased from the previous 30% to 45% (for SMEs, to 55%) in order to exploit the existing industrial waste heat potential.

Overarching measures

As part of the overarching measures, the German government, under the leadership of the Federal Ministry of Finance, intends to present a proposal for a comprehensive reform of levies, charges and taxes in the energy system at the beginning of 2022.

Next steps

On May 28, 2021, the Federal Council issued within a shortened time limit a detailed statement on the Federal Government's draft Climate Protection Act 2021 (printed matter 411/21). Therein, the Federal Council calls for not only the fight against climate change but also the measures to mitigate its negative consequences to be regulated as law. The financial burdens of climate protection would have to be distributed fairly, appropriately and proportionately between the federal, state and local governments. The Federal Government would be obliged to sponsor the necessary substantial investments in local public transport and the building stock.

The Federal Parliament’s first reading of the draft law took place on June 10, 2021. The draft was referred to the committees for further debate. With regard to the government draft – presented less than two weeks after publication of the Federal Constitutional Court decision – the federal states, associations and central municipal associations were given a comment period of merely around one working day. This was classified by the National Regulatory Control Council as a significant error (printed matter 411/21, Annex, pp. 4, 8). The National Standards Control Council states the following:

"The National Standards Control Council sees a significant deficiency in the fact that the regulatory project, which makes important decisions with significant effects on society and the economy, formally provides for consultation of the states, associations and municipal umbrella organizations, but with a deadline of about one working day, in fact does not allow for any participation. (...) Especially for such far-reaching decisions, this would have been absolutely necessary."

It could be beneficial for the comments submitted on the draft to be taken into account in the debate.

Outlook

With this  ̶  very rapid  ̶  amendment to the law, the legislature is complying with the request of the Federal Constitutional Court. However, it is highly questionable whether the legislator will achieve the necessary balance of interests with this short-term amendment to the law. The Federal Constitutional Court had expressly called for a planned approach in order to allow planning and legal certainty for those affected.

×