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Blog...Federal Climate Change Act (Bundes-Klimaschutzgesetz)

Federal Climate Change Act (Bundes-Klimaschutzgesetz)

Business
Legislation & Standards
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What is the Bundes-Klimaschutzgesetz? What targets does it set, and how are these being achieved?
Business
2024-04-19T00:00:00.000Z
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German flag outside building

The Federal Climate Change Act, or 'Bundes-Klimaschutzgesetz,' was implemented in Germany in 2019 to address the growing issue of climate change. This act sets enforceable targets for reducing greenhouse gas emissions across various sectors including energy, transportation, buildings, and agriculture, aiming for near-zero emissions by 2045. It aligns with Germany's obligations under the Paris Agreement and moves the country towards a sustainable, low-carbon future.

The Klimaschutzgesetz outlines clear emission reduction goals and timelines for each sector, establishing a legal framework for Germany's climate action. In this article, we’ll provide an overview of the act's key objectives and the steps Germany is taking to meet its environmental responsibilities while managing the economic and social impacts of these changes.

👉 What is the Bundes-Klimaschutzgesetz? What targets does it set, and how are these being achieved?

What is the Bundes-Kilmaschutzgesetz?

The Bundes-Klimaschutzgesetz, or the Federal Climate Change Act, is a law passed by Germany in 2019 to reduce greenhouse gas emissions within the country. The legislation specifies annual and long-term emission reduction targets for various economic sectors up to the year 2050, where the goal is to achieve negative greenhouse gas emissions. The act provides a legally binding framework to ensure Germany meets its international commitments under the Paris Agreement and progresses towards a sustainable, carbon-neutral future.

💡In 2021, the Bundestag (Germany’s national parliament) passed an amendment to the Climate Change Act, increasing the timeline for achieving net greenhouse gas neutrality. The new targets are as follows: 

  • A greenhouse gas reduction of 65% by 2030
  • A greenhouse gas reduction of 88% by 2040
  • Net greenhouse gas neutrality by 2045
  • Negative greenhouse gas emissions after 2050
German town

Why was the Bundes-Kilmaschutzgesetz created?

Germany's decision to introduce the Klimaschutzgesetz aligns with its commitments under international climate agreements, most notably the Paris Agreement, which seeks to limit global warming to well below 2 degrees Celsius above pre-industrial levels. To meet these commitments, countries are required to establish ambitious national climate action plans. For Germany, this meant creating a law that not only sets targets but also enforces compliance through binding measures.

Prior to the Klimaschutzgesetz, Germany had already implemented several policies aimed at reducing its environmental impact. These included incentives for renewable energy, energy efficiency standards, and the Energiewende (Energy Transition) policy, which focused on phasing out nuclear power and fossil fuels. However, despite these efforts, it became clear that more structured and enforceable regulations were necessary to ensure significant progress in emissions reduction.

The introduction of the Bundes-Klimaschutzgesetz was partly driven by the need to have a more coordinated and legally binding approach to climate action across all sectors of the economy. Previous measures, though impactful, lacked the cohesive structure and enforceability required to achieve Germany’s ambitious climate goals. The Klimaschutzgesetz addresses these gaps by setting clear targets for emissions reductions and establishing mechanisms for monitoring and compliance, ensuring that all sectors contribute effectively to the national objectives.

What are the key provisions of the Bundes-Klimaschutzgesetz?

The Bundes-Klimaschutzgesetz, enacted in response to both national, international, and European climate targets, incorporates several key provisions designed to steer Germany towards its long-term goal of greenhouse gas neutrality by 2045. Here’s how the act structures these ambitions:

Sector-specific targets

The act defines specific emissions reduction targets for six major sectors: energy, industry, transport, buildings, agriculture, and waste management. The targets are set in accordance with European greenhouse gas reduction plans and have been calculated for the period 2022 to 2030. Emissions targets beyond this date are due to be set in 2024

Each sector must meet annual goals that contribute to a broader target of reducing greenhouse gas emissions by at least 65% by 2030 compared to 1990 levels. These targets are instrumental in guiding Germany towards achieving its revised goal of carbon neutrality by 2045, advanced from the previous 2050 target.

Where greenhouse gas emissions are above or below the annual emission targets, the difference is either subtracted from or added to the residual annual sectoral emissions budget, which will be spread out over the period until 2030. 

National carbon tax

A significant feature of the law is the introduction of a national carbon tax, which was set at 25 euros per ton of CO2 starting in 2021. This tax applies to the building heating and transport sectors, which are not fully covered under the EU Emissions Trading System (ETS). The carbon tax is intended to incentivise reductions in carbon emissions by making it more costly to emit CO2, thereby encouraging businesses and consumers to switch to greener alternatives. The system operates as cap and trade, with allowances auctioned from 2026 onwards. 

The emissions trading scheme exists in parallel to the EU’s ETS and covers a large portion of emissions not already covered by the ETS. Where there is overlap between the two systems, this is priced into the German national carbon tax.  

Monitoring and reporting requirements

The act mandates continuous monitoring and reporting to ensure transparency and accountability in meeting the emissions targets. An independent expert council called the Council of Experts for Climate Matters (Expertenrat für Kimafragen), is responsible for producing reports of the targets achieved, alongside wider measures and trends. This mechanism allows for ongoing evaluation and necessary adjustments to policies and strategies.

Adjustment mechanisms

In March every year, the German Environmental Protection Agency (UBA) publishes annual emissions by sector. Should any sector fail to meet its annual emissions budget, immediate corrective actions are required. The responsible federal ministry must prepare a corrective program (referred to as a sofortprogramm) within three months that will implement measures to realign the sector with its targets, ensuring continuous progress towards the overarching goals of the act. This corrective program is reviewed by the Council of Experts on Climate Matters. 

Climate action plans

Every five years, detailed climate action plans must be developed under the act. These plans outline specific measures and strategies to achieve forthcoming targets, ensuring a structured approach to climate action over the long term.

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How is the Bundes-Kilmaschutzgesetz implemented?

To achieve the ambitious goals laid out in the Bundes-Klimaschutzgesetz, Germany has adopted a multi-faceted approach to its implementation. These strategies involve a mix of regulatory measures, financial incentives, and innovative technologies to ensure compliance and facilitate the transition to a low-carbon economy.

Regulatory measures

Germany has strengthened its regulatory framework to ensure that all sectors comply with their emissions targets. This includes stricter emissions standards for vehicles, energy efficiency requirements for buildings, and regulations that promote sustainable agricultural practices. These regulations are designed to reduce overall carbon footprints and encourage the adoption of environmentally friendly technologies.

Financial incentives

A key component of the implementation strategy is the provision of financial incentives to both businesses and citizens. These incentives are aimed at offsetting the initial costs of transitioning to greener alternatives. For example, subsidies are available for the installation of renewable energy systems such as solar panels and wind turbines. Additionally, tax rebates and reduced tax rates are offered for energy-efficient renovations and upgrades.

Carbon pricing

The national carbon tax introduced by the Klimaschutzgesetz is an effective tool in Germany's strategy to reduce greenhouse gas emissions. By putting a price on carbon, it makes emitting carbon more expensive and economically unattractive. This pricing mechanism is complemented by the EU Emissions Trading System (ETS), which covers larger industrial emitters and power producers, providing a comprehensive pricing framework for carbon emissions across the economy.

Investment in renewable energy

Significant investments have been made in expanding Germany’s renewable energy capacity. These investments are part of a broader strategy to decrease dependence on fossil fuels and increase the production of energy from renewable sources like wind, solar, and biomass. The government’s support has helped position Germany as a leader in renewable energy technology development and deployment.

Research and development

The German government actively supports research and development in green technologies, recognising that innovation is key to achieving its climate goals. Funding is provided for projects that explore new ways of reducing emissions, improving energy efficiency, and developing sustainable industrial processes. This not only contributes to Germany's environmental goals but also bolsters its economy by fostering new industries and job opportunities.

Public awareness and education

Public awareness campaigns and educational programs are integral to the implementation strategy. By informing citizens about the benefits of reducing carbon footprints and how to achieve these reductions, the government aims to foster a culture of sustainability. Initiatives include promoting public transportation, cycling, and walking, as well as encouraging the reduction of energy consumption in homes and businesses.

International cooperation

Germany also engages in international cooperation to enhance the effectiveness of its climate policies. By working with other countries and international organisations, Germany shares best practices, gains access to advanced technologies, and collaborates on global initiatives to combat climate change.

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Has the Bundes-Kilmaschutzgesetz been successful in achieving its goals?

Since the implementation of the Bundes-Klimaschutzgesetz in 2019, Germany has managed to achieve significant reductions in greenhouse gas emissions, particularly within its energy sector. The transition away from coal and the increase in renewable energy capacity were central to surpassing its 2023 climate goals. With over 50% of electricity now sourced from renewables and a dramatic decrease in coal-fired power production, Germany is making substantial progress toward its 2030 and 2045 neutrality targets.

However, while the energy sector shows encouraging results, other sectors - like transport and buildings - have not managed to hit their targets. The stagnation of the electric vehicle market and higher-than-targeted emissions from buildings highlight the challenges these sectors face in decarbonising. Efforts such as the proposed reforms in tax subsidies and the expansion of public transport are essential to bring these sectors back on track.

Economically, the Bundes-Klimaschutzgesetz has been successful in fostering innovation and investment in renewable energy and energy efficiency technologies, helping to create new jobs and reducing reliance on imported fossil fuels. This shift has contributed to economic stability within the country, protecting its economy from fluctuations in oil and gas prices. Yet, despite these benefits, the carbon tax and stringent emissions standards have imposed financial burdens on some industries - particularly those that are dependent on fossil fuels.

What's clear is that Germany's path to its 2045 carbon neutrality goal remains challenging. Sectors lagging behind require more aggressive policies and innovations. Additionally, the recent constitutional court ruling that cancelled funding earmarked for climate projects poses new financial challenges, emphasising the need for a smart mix of fiscal strategies to achieve more with less.

Moving forward, Germany's commitment to refining its climate policies and adapting to emerging challenges will be pivotal in fulfilling the ambitious targets of the Bundes-Klimaschutzgesetz and maintaining leadership in global climate action.

What about Greenly?

At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required. 

If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.

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