Released October 06, 2021 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German industry will have to wait until Christmas to discover exactly what the country's new government has in mind on the thorny issues of accelerating emissions reduction across industry and energy sectors, increased renewables investment, carbon taxes and a cut-off date for the sale of internal combustion engines (ICE).
However, the three most likely coalition partners all presented decarbonisation as a key campaign promise. The recent German elections were won by the centre left Social Democratic Party (SDP), led by Germany's Finance Minister, Olaf Scholz. It narrowly edged out its former coalition partner, the centre right Christian Democrats and their Bavaria-only sister party, the Christian Social Democrats (CDU/CSU), by 25.7% of the vote to 24.1%. The CDU/CSU, under former Chancellor Angela Merkel, had been the dominant political party in Germany for 16 years. The SDP's win however means the country now faces its first ever three-party coalition, most likely with the third largest party, the Greens, on 14.8% of the vote and the business-friendly Free Democrats Party (FDP), on 11.5% of the vote.
Scholz has already called on them to make up the new government and claimed he wants to be in office by Christmas. He said: "Voters have clearly spoken. They have said who should build the next government by strengthening three parties, the Social Democratic Party, the Greens and the Free Democrats. Consequently, that is the clear mandate that voters of this country have given, that these three parties should create the next government."
In his campaign, he made the faster rollout of renewables his key climate policy for the short term, claiming that without more renewables there will not be enough clean electricity for all of the other decarbonisation plans: e-mobility, heating, green hydrogen production and infrastructure modernisation. "The most important task for the new government right at the start of the next legislative period will be to increase renewables targets and enable faster approvals and grid extensions," Scholz said. His party has committed to 100% renewable electricity by 2040, which will be helped by solar installations on all suitable roofs and binding regional renewable targets. Germany's rollout of major windfarms has stalled in recent years, thanks largely to restrictive legislation and regional opposition. Scholz has stayed mainly on the fence when it comes to calls for an earlier coal phase-out date, which has previously been agreed for 2038. The Greens are expected to push for faster renewables rollout, faster exit from coal and faster decarbonisation but the SDP and FDP will likely not support any major tax hikes on German citizens to pay for them.
It is likely that there will be a large-scale rollout of Carbon Contracts for Difference (CCfDs). These guarantee companies a high and steady CO2 price to make investments in low-emission technologies competitive and help offset the high costs of switching over to climate-neutral production. Most industry sectors have pushed for their introduction. If implemented, the government will offer long-term contracts with companies that will cover the difference between the price of emission allowances under the European Emissions Trading System (ETS) and the contract price, guaranteeing a carbon price for the project. SPD and the Greens are in favour but the FBD will take convincing.
Various industry sectors have made their wishes clear for the new government. Zukunft Gas, the German gas industry representative body, welcomed the outcome and stated that change was necessary to achieve progress in the energy transition and the importance of quickly ramping up the hydrogen sector. "The German gas industry [...] is ready and willing to contribute its expertise and innovative strength to make the energy transition a success," claimed the group's chairman, Timm Kehler. "We need affordable hydrogen, especially for industry, so that the CO2 savings in Germany are actually achieved through low-CO2 processes - and not by relocating CO2-intensive production abroad."
At automaker Volkswagen AG (Wolfsburg), its chief executive officer, Herbert Diess, called on the new government for a faster increase in the CO2 price, an earlier coal phaseout and a greater expansion of renewables, among other things. A summary of his wishes, published by Reuters: are: "The fact that climate policy reforms and modernization & digitisation are high on the agenda is a good basis for coalition negotiations. We have thought about this and would like the following...points to be included in the negotiations. A CO2 price of 65 euros (US$73) per tonne as early as 2024...End subsidies for fossil fuels. Bring forward significantly the phase-out of coal...expand renewable energies to at least 255 gigawatts in 2030...keep purchase rebates for electric vehicles and gradually reduce it by 2025...Set mandatory targets for fast charging...green hydrogen is precious and energy-intensive and is urgently needed for green steel and for decarbonisation of industries such as chemicals and cement."
It is considered that Germany's new government will not set an aggressive target for phasing out vehicles using internal combustion engines (ICEs). The critical question will be how to move the nation's massive automotive industry and its energy system away from fossil fuels without undermining the economy. The Greens want the ICE banned by 2030 but the other minority party, the FBD, do not, believing that the sector should continue to experiment with new technologies including synthetic fuels. The larger SPD party did not refer to the ICE issue during the election but is expected to take a moderate stance, as it did while in power with Merkel's CDU party in recent years. Carmakers on the other hand are aggressively pursuing the EV market.
In 2019 VW, which has 12 car brands under its control, including Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT and Skoda, announced that it expected to spend $91 billion on electrifying vehicles. Half of that investment will go to China but earlier this year it announced its intention to build six battery factories in Europe, each with a capacity of 40 GWh. The first plant is also Europe's first and largest EV battery project with battery maker Northvolt (Stockholm, Sweden) in Skellefteå, Sweden. The second is a VW-owned project with Chinese partner Gotion High-Tech to build a 40 GWh plant on a 690-acre site in Salzgitter, Germany, in 2025. In May, luxury sports car maker Porsche AG (Stuttgart, Germany), owned by VW, announced that it will construct a battery cell plant in Tubingen, Germany.
In August, fellow German auto giant Mercedes-Benz (Stuttgart, Germany) announced plans to go all-electric by 2030 and said it would set up eight additional EV battery factories with existing partners to support the massive shift in strategy. It aims to install battery cell capacity of more than 200 gigawatt-hours (GWh), in addition to the already planned network of nine plants dedicated to building battery systems, some of which are already operational. For additional information, see August 2, 2021, article--Mercedes-Benz Going All-Electric By 2030, Building Eight More Battery Plants.
Germany's chemical and pharmaceutical industry body, VCI, has called on the parties to "act swiftly" calling on them to "form a government capable of acting as quickly as possible in order to quickly tackle challenges such as climate change. In the first hundred days you have to set the course for a renewal of Germany's industrial policy. Action must be taken in several policy areas at the beginning of the legislative period so that Germany remains an internationally competitive location for chemicals and pharmaceuticals. These include, above all, electricity costs, research funding, the reduction of bureaucracy, approval procedures and corporate taxes."
Scholz has offered his support to help the steel sector--one of Germany's biggest emitters--transform. Visiting Thyssenkrupp Steel Europe on his campaign he said: "I have made a clear commitment: in the first year of the coming government, I want to take decisions for the expansion of electricity generation capacity in Germany. He acknowledged that steel companies would not invest in converting their processes without sufficient clean power. Thyssenkrupp Steel works council head, Tekin Nasikkol, told Reuters: "There is no time to lose. We expect the new federal government to establish a transformation fund for the steel industry of 10 billion euros (US$11.75 billion) in the first 100 days."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
However, the three most likely coalition partners all presented decarbonisation as a key campaign promise. The recent German elections were won by the centre left Social Democratic Party (SDP), led by Germany's Finance Minister, Olaf Scholz. It narrowly edged out its former coalition partner, the centre right Christian Democrats and their Bavaria-only sister party, the Christian Social Democrats (CDU/CSU), by 25.7% of the vote to 24.1%. The CDU/CSU, under former Chancellor Angela Merkel, had been the dominant political party in Germany for 16 years. The SDP's win however means the country now faces its first ever three-party coalition, most likely with the third largest party, the Greens, on 14.8% of the vote and the business-friendly Free Democrats Party (FDP), on 11.5% of the vote.
Scholz has already called on them to make up the new government and claimed he wants to be in office by Christmas. He said: "Voters have clearly spoken. They have said who should build the next government by strengthening three parties, the Social Democratic Party, the Greens and the Free Democrats. Consequently, that is the clear mandate that voters of this country have given, that these three parties should create the next government."
In his campaign, he made the faster rollout of renewables his key climate policy for the short term, claiming that without more renewables there will not be enough clean electricity for all of the other decarbonisation plans: e-mobility, heating, green hydrogen production and infrastructure modernisation. "The most important task for the new government right at the start of the next legislative period will be to increase renewables targets and enable faster approvals and grid extensions," Scholz said. His party has committed to 100% renewable electricity by 2040, which will be helped by solar installations on all suitable roofs and binding regional renewable targets. Germany's rollout of major windfarms has stalled in recent years, thanks largely to restrictive legislation and regional opposition. Scholz has stayed mainly on the fence when it comes to calls for an earlier coal phase-out date, which has previously been agreed for 2038. The Greens are expected to push for faster renewables rollout, faster exit from coal and faster decarbonisation but the SDP and FDP will likely not support any major tax hikes on German citizens to pay for them.
It is likely that there will be a large-scale rollout of Carbon Contracts for Difference (CCfDs). These guarantee companies a high and steady CO2 price to make investments in low-emission technologies competitive and help offset the high costs of switching over to climate-neutral production. Most industry sectors have pushed for their introduction. If implemented, the government will offer long-term contracts with companies that will cover the difference between the price of emission allowances under the European Emissions Trading System (ETS) and the contract price, guaranteeing a carbon price for the project. SPD and the Greens are in favour but the FBD will take convincing.
Various industry sectors have made their wishes clear for the new government. Zukunft Gas, the German gas industry representative body, welcomed the outcome and stated that change was necessary to achieve progress in the energy transition and the importance of quickly ramping up the hydrogen sector. "The German gas industry [...] is ready and willing to contribute its expertise and innovative strength to make the energy transition a success," claimed the group's chairman, Timm Kehler. "We need affordable hydrogen, especially for industry, so that the CO2 savings in Germany are actually achieved through low-CO2 processes - and not by relocating CO2-intensive production abroad."
At automaker Volkswagen AG (Wolfsburg), its chief executive officer, Herbert Diess, called on the new government for a faster increase in the CO2 price, an earlier coal phaseout and a greater expansion of renewables, among other things. A summary of his wishes, published by Reuters: are: "The fact that climate policy reforms and modernization & digitisation are high on the agenda is a good basis for coalition negotiations. We have thought about this and would like the following...points to be included in the negotiations. A CO2 price of 65 euros (US$73) per tonne as early as 2024...End subsidies for fossil fuels. Bring forward significantly the phase-out of coal...expand renewable energies to at least 255 gigawatts in 2030...keep purchase rebates for electric vehicles and gradually reduce it by 2025...Set mandatory targets for fast charging...green hydrogen is precious and energy-intensive and is urgently needed for green steel and for decarbonisation of industries such as chemicals and cement."
It is considered that Germany's new government will not set an aggressive target for phasing out vehicles using internal combustion engines (ICEs). The critical question will be how to move the nation's massive automotive industry and its energy system away from fossil fuels without undermining the economy. The Greens want the ICE banned by 2030 but the other minority party, the FBD, do not, believing that the sector should continue to experiment with new technologies including synthetic fuels. The larger SPD party did not refer to the ICE issue during the election but is expected to take a moderate stance, as it did while in power with Merkel's CDU party in recent years. Carmakers on the other hand are aggressively pursuing the EV market.
In 2019 VW, which has 12 car brands under its control, including Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT and Skoda, announced that it expected to spend $91 billion on electrifying vehicles. Half of that investment will go to China but earlier this year it announced its intention to build six battery factories in Europe, each with a capacity of 40 GWh. The first plant is also Europe's first and largest EV battery project with battery maker Northvolt (Stockholm, Sweden) in Skellefteå, Sweden. The second is a VW-owned project with Chinese partner Gotion High-Tech to build a 40 GWh plant on a 690-acre site in Salzgitter, Germany, in 2025. In May, luxury sports car maker Porsche AG (Stuttgart, Germany), owned by VW, announced that it will construct a battery cell plant in Tubingen, Germany.
In August, fellow German auto giant Mercedes-Benz (Stuttgart, Germany) announced plans to go all-electric by 2030 and said it would set up eight additional EV battery factories with existing partners to support the massive shift in strategy. It aims to install battery cell capacity of more than 200 gigawatt-hours (GWh), in addition to the already planned network of nine plants dedicated to building battery systems, some of which are already operational. For additional information, see August 2, 2021, article--Mercedes-Benz Going All-Electric By 2030, Building Eight More Battery Plants.
Germany's chemical and pharmaceutical industry body, VCI, has called on the parties to "act swiftly" calling on them to "form a government capable of acting as quickly as possible in order to quickly tackle challenges such as climate change. In the first hundred days you have to set the course for a renewal of Germany's industrial policy. Action must be taken in several policy areas at the beginning of the legislative period so that Germany remains an internationally competitive location for chemicals and pharmaceuticals. These include, above all, electricity costs, research funding, the reduction of bureaucracy, approval procedures and corporate taxes."
Scholz has offered his support to help the steel sector--one of Germany's biggest emitters--transform. Visiting Thyssenkrupp Steel Europe on his campaign he said: "I have made a clear commitment: in the first year of the coming government, I want to take decisions for the expansion of electricity generation capacity in Germany. He acknowledged that steel companies would not invest in converting their processes without sufficient clean power. Thyssenkrupp Steel works council head, Tekin Nasikkol, told Reuters: "There is no time to lose. We expect the new federal government to establish a transformation fund for the steel industry of 10 billion euros (US$11.75 billion) in the first 100 days."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
