Just how much can a vote moving Europe’s powerhouse to the right undermine green policies?
The upcoming German election looks set to be won by the conservatives, who might adjust green policies at the national and European level, but won’t abandon the fight against climate change, not least because of the demands of their business allies, experts said.
An early election was called for February 23, after a three-party coalition of Social Democrats (SPD), Greens and Free Democrats collapsed in November due to conflict over the budget and economic policy.
The election campaign has been dominated by the sluggish state of the economy and migration, with the far-right Alternative for Germany (AfD) expected to capitalize on widespread unease about immigration to take second place behind the Christian Democrats (CDU) led by Friederich Merz.
The AfD, which says it does not believe that climate change is caused by human-made emissions and wants to end decarbonization efforts, is polling at around 20%.
The AfD, which says it does not believe that climate change is caused by human-made emissions and wants to end decarbonization efforts, is polling at around 20%. However, Germany’s mainstream parties have vowed not to work with the AfD, setting the stage for the CDU to form a coalition government with one or two other parties.
Climate eclipsed by economy, immigration
While the climate crisis has barely featured in the election campaign, the CDU will have to seek compromises on green policies to form a government, likely with the parties of the current coalition.
“All of the big parties are committed to net zero but there are obviously differences in the question of how to achieve that and what other objectives might be important,” said Verena Menne, head of Forum Nachhaltige Geldanlagen, the German association for sustainable investments.
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The CDU election manifesto says the party wants to scrap a controversial law that requires heating systems in new buildings to use at least 65% renewable energy. But it also includes a commitment to promote green hydrogen and emissions trading to reach climate neutrality by 2045.
“We need an energy policy that combines security of supply and climate protection. We make energy policy for people and for our environment,” the CDU manifesto says.
The CDU’s allies in business remain committed to reducing emissions and investing in green technology, according to Germany’s Clean Energy Wire.
Matthias Hübner, head of Germany’s Sustainable Finance Cluster which is sponsored by the finance industry, said the biggest priority for business is reviving the economy, cutting bureaucracy, and creating a stable regulatory environment.
“Germany can’t afford to waste time. The sooner we get back to regular business and taking political decisions the better it will be for everyone,” he said. “Corporates and financial institutions are just looking for certainty.”
The German election comes as a rise in popularity for right-wing parties across Europe has driven skepticism around environmental regulations.
CDU backs overhaul of EU reporting rules
At the end of February, the European Commission is expected to unveil details of how green reporting requirements will be simplified after many businesses complained that the regulations put Europe at a competitive disadvantage.
Ursula von der Leyen, a member of Germany’s CDU, said in November she wanted to simplify three major EU environmental laws: the corporate sustainability reporting directive (CSRD), the corporate sustainability due diligence directive and the EU taxonomy.
Late last year, the outgoing German government called for a delay to the expanded CSRD which introduced new sustainable finance rules for thousands of companies. The CDU recently approved a position paper by its conservative party grouping in the European parliament, which demanded a two-year halt, calling the laws “excessive and burdensome”.
Menne said Von der Leyen probably had in mind that she would have a more supportive audience for her reforms in Germany after the election.
Menne supports a review of some parts of the laws such as the definition of “do no significant harm” and the EU’s metric to measure the proportion of green assets on a bank’s balance sheet, known as the green asset ratio, which the financial industry has criticized for failing to accurately portray efforts to make the economy sustainable.
“It’s good to look at that again to make it better reflect what banks are actually doing,” Menne said. “We are obviously very much in favor of good and efficient regulation, but we are very much against just slashing down requirements in order to reduce bureaucracy.”
“We won’t solve this problem by just adding additional bureaucracy… We need real economic incentives for both corporates and also for private individuals to behave in a sustainable way.”
Hübner said he welcomed the shift to cut bureaucracy and said he hoped a conservative-led government would put more emphasis on incentivizing green action, such as through carbon pricing.
Balancing climate regulation and incentives
“We won’t solve this problem by just adding additional bureaucracy and additional regulation,” he said. “We need real economic incentives for both corporates and also for private individuals to behave in a sustainable way.”
The European Central Bank has said the EU needs to increase transparency to facilitate more capital into green projects, but the complexity of current regulation around climate disclosures could hinder the effectiveness of such efforts.
Both Menne and Hübner hope that after the election the next German government will take a more active role in the EU, especially after the outgoing three-way coalition was distracted by domestic squabbles.
“Germany should be more actively involved in the European policy-making process strategically,” Menne said, noting that the CDU is a very pro-European party.
Hübner agreed: “I would hope that Germany becomes more vocal again. We have been very silent over the last years and we have also lost influence … when we talk about sustainability and transformational topics, close alignment between Paris and Berlin would be an excellent first step.”
Featured photo: Friedrich Merz’s Christian Democrats are expected to poll first in the German election. © Olaf Kosinsky
