The climate crisis will be a top priority for the next German government, regardless of its party constellation. “Climate change has finally become a cross-party issue,” said Arne Jungjohann, a political analyst affiliated with the Heinrich Böll Foundation, the German Greens’ think tank, on Sunday. “The Greens’ showing would have been stronger if the SPD and CDU/CSU hadn’t addressed climate prominently in their campaigns,” he added.

The Greens won close to 15% of the vote, nearly double the 8.4% they won at the last elections in 2017. It was their best showing ever and the biggest increase of all parties.

Green Party chancellor candidate Annalena Baerbock (left) and co-leader of party Robert Habeck react to election results on 26 September 2021. (Photo by TOBIAS SCHWARZ/AFP via Getty Images)

The next German government has the job of figuring out how to make Germany climate neutral by 2045, and perhaps even more challenging, reduce its greenhouse gas emissions by 65% by 2030, compared with 1990. The outgoing government set these goals earlier this year – a notch up from climate neutrality by 2050 and a 55% cut by 2030 – in response to a landmark ruling from the German Federal Constitutional Court. Devastating late summer floods in Germany also led outgoing chancellor Angela Merkel to draw an unprecedented link between natural disasters and climate change.

If the Greens did well, some had hoped for even more. Back in the spring, they looked set to become the second-biggest political power in Germany. There was even talk of them having a modest chance at the chancellorship itself. They briefly led in the polls. A Black-Green coalition with the conservative CDU/CSU seemed a likely outcome.

Sunday’s elections results throw up quite a different future. The CDU/CSU scored their worst result ever. Coming seemingly out of nowhere, the centre left SPD made a remarkable comeback under the leadership of finance minister Olaf Scholz, who is now vying with his conservative counterpart Armin Laschet to lead the creation of a new coalition government.

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Coalition options

Three options would garner a majority in the German Parliament, or Bundestag: a 'traffic light’ coalition between the SPD, Greens and liberal pro-business FDP party, a ‘Jamaica' coalition between the CDU/CSU, Greens and FDP, or another ‘Grand Coalition’ between the SPD and CDU/CSU. A priori, no one wants the last. It is a fallback option if all else fails. Which of the other two prevails depends on how the Greens and FDP play their kingmaker role. That they intend to play it to the full was made clear on election night, when FDP leader Christian Lindner reached out to Greens leader Annalena Baerbock to suggest they should speak first. She agreed.

What happens now is exploratory talks between the parties. The end goal is a coalition agreement. Coalition agreements in Germany are de facto government programmes. They represent the common ground for all policymakers – across parties but also institutions, including ministries, cabinets and the Parliament. Their role as a reference document for the governing coalition explains why you will see fights over the nitty gritty of their wording. Moreover, they have got more specific over time – the last one stretched to 175 pages.

There are no hard and fast rules for coalition talks. The only associated time limit is that members of parliament need to meet within 30 days of the election result. Until a new coalition is formed, current ministers stay in office. Back in 2009, the talks took only 31 days, but in 2017 they took 171 days. Then, much like today, there were many options on the table. Scholz and Laschet have both said they want to form a government by Christmas. Like in the last elections, you can expect substantial amounts of policy to creep into the talks from an early stage.

Parties may seek to maximise ministerial appointments, policy impact or credibility with voters. The latter led Lindner to pull out of three-way talks with the Greens and CDU/CSU back in 2017 due to fundamental differences with the Greens. Better not to govern than to govern badly, he said. Meanwhile, looking to maximise policy impact also means taking into account majorities in Germany’s upper house, or Bundesrat, and here the otherwise popular ‘traffic light' option has none. This would make actual governing harder for this coalition.

Coalition talks are likely to be complex and time-consuming, says Jungjohann. "Germany’s party system is now highly fragmented. This fragmentation has been ongoing for many years but remained hidden in the era of continuity under highly popular Chancellor Merkel. Germany is thus finally catching up with a development in many western European countries.” Both the traffic light and Jamaica coalitions exist at regional level.

Bottom lines on climate and energy

The details of future German climate and energy policy will need to be worked out, but several elements are clear. The closure of Germany’s remaining nuclear power plants in 2022 is a done deal, as is the phase-out of coal. The latter is likely to take place earlier than the agreed deadline of 2038, with both the SPD and CDU/CSU recently indicating some flexibility on that date. All parties are committed to deploying more renewables, although only the Greens have set a concrete goal.

Transport is a more divisive issue, with the Greens and SPD wanting to prioritise electric vehicles, while the FDP and CDU/CSU are open to hydrogen-based liquid fuels in conventional cars. The FDP is open to hydrogen to heat buildings too, while the SPD and Greens favour heat pumps.

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The biggest policy conflict is between the Greens and the FDP, which find themselves at opposite ends of the spectrum on many issues, including climate action. In a nutshell, the Greens favour phase-outs, tough standards and big investment programmes, whereas the pro-market FDP’s favourite climate policy is emissions trading and it has ruled out tax increases to fund higher spending.

Georg Zachmann at Brussels-based economic think tank Bruegel said on Monday: "It will be exciting whether the FDP or Greens get the finance ministry, which will play an important role for spending programmes and green EU budget rules – both especially under a traffic light [coalition] – but also for negotiating the EU ETS [Emissions Trading System] reform.”

Whatever shape the new German government takes will have implications for EU climate and energy policy.

European implications

The poor performance of the far left Die Linke party means there is now no possibility for a completely leftist coalition of the centre left, far left and Greens. This means any coalition formed by Scholz will have some kind of conservative element to it, be it a grand coalition with the CDU/CSU or a traffic light coalition with the Greens and FDP. The other possibility is a heavily conservative Jamaica coalition of the CDU/CSU, FDP and Greens. So yesterday's election did bring clarity for Brussels that there is unlikely to be the type of dramatic shift in Germany's positions at EU level that might have been seen with a dramatic leftward turn.

However, the three main possible outcomes would still bring differences when it comes to Germany's position on energy and climate policy – in particular how much money it is willing to spend. If Scholz becomes chancellor, which seems the most likely scenario but is by no means assured, it would still bring a shift in voting patterns in the EU Council – the most powerful and also most secretive EU institution. In the coming year, those voting patterns will be crucial to whether the EU adopts an ambitious 'Fit for 55' package to deliver a 55% greenhouse gas emissions reduction by 2030.

The FDP are in favour of climate protection but they don’t agree with the measures necessary for it. So these will be complicated discussions. MEP Sven Giegold, the Greens

The Council functions as the upper house in the EU’s legislature, much as the Bundesrat does in Germany. It is made up of a representative from each EU member state. For energy issues, 27 national energy ministers attend energy councils in Brussels or Luxembourg four times a year. For the big-picture decisions – energy and climate issues often get bumped up to this level – it is the prime ministers and presidents that meet at European Council summits in Brussels. The bigger the country, the more important the representative’s vote. So Germany is the ultimate prize.

For the past two decades, both the European Parliament and Council – the EU’s two co-legislators – have been dominated by the centre right, with the various national conservative parties united in a political family called the European Peoples Party, of which Angela Merkel’s CDU is a member. The EPP has held strong majorities in the Parliament, Council and Commission presidency for almost 20 years, and although the EPP has come a long way in its acceptance of the need for urgent climate action, for years it killed off increased ambition out of fears over economic effects. If Laschet ends up as chancellor it means the EPP will maintain a strong foothold in the Council, which likely means less climate ambition and continued concern for the effects on industry Brussels has come to expect from Germany's votes in the Council.

National constraints

The big question is how constricted a Chancellor Scholz would be by an alliance with the FDP. “The Liberals today are not the same we knew in the 1970s and 1980s,” said German MEP Sven Giegold, spokesperson for the Greens in the European Parliament, on Monday morning. "They became a party that [targets]… voters who are in more general terms sceptical of the state. They are in favour of climate protection but they don’t agree with the measures necessary for it. So these will be complicated discussions.”

Much will depend on which portfolio the liberals are given in the cabinet. FDP leader Lindner is likely to demand the finance ministry as the price of joining a coalition, in which case he would always be warning the government about the costs of climate action. The FDP has a history, in Brussels and Berlin, of giving voice to industry concerns over climate laws, but with a Green energy minister and a centre left chancellor, is it possible Lindner would not wish to become a roadblock to climate laws? It would take time to have a clear answer on that.

Thorsten Lieb, district chairman for the FDP in Frankfurt and a candidate in the election, believes climate and environmental policy will “not be a blocking point at the end because we are together with regard to the outcome and the target… The current IPCC data says to us and the Greens that there is more for us to do than in our party programmes. The key question will be not on the target but on the way to reach the target.”

That question of how to reach the EU’s target will be crucial, and the coalition talks will have to come to an agreement on what Germany’s position will be for the upcoming 'Fit for 55' talks. There are big questions over fossil fuel subsidies and energy taxation, inclusion of new sectors in the EU ETS, and a carbon border tax on imports from countries without equivalent climate action. Whether or not the package survives the legislative process will depend on whether it is watered down by national governments in the Council, which is usually what occurs. Having a solidly pro-climate action German government would make a world of difference.

As uncertain as the make-up of the next German government is, the biggest fear in Brussels is that there will not be one at all. Sunday’s inconclusive result has prompted speculation that Germany will not have a government for many months, with Angela Merkel staying on as caretaker chancellor well into 2022. This would likely have the effect of delaying 'Fit for 55' votes. It would be a disaster, Giegold says, not only for climate laws but also for the deeper EU integration necessary to make them happen.

“I think Germany has a responsibility to really have a result before the end of the year, also because of the upcoming French presidency [of the EU]”, which starts on 1 January, he says. “The French government… has a real chance to move Europe further. If there is no German government to match, this will be really bad for Europe. I haven’t had the impression that this thinking is already in the head of everyone in Berlin."