German elections cleantech

The consequences of the German federal election for cleantech companies

Germany has voted – and an era has come to an end. After 16 years as Chancellor, Angela Merkel of the Christian Democratic Union (CDU) party did not stand for re-election. Symbolically, there was also a picture of last night’s event: while the conservative candidate Armin Laschet spoke to his supporters, the Chancellor stood somewhat apart. This blog explains the current developments, gives an outlook on the coming weeks and summarises the impact of the election on cleantech companies.

Election victory for the SPD – defeat for the CDU/CSU

The emotional state of the two major parties could not be more different. The social democrats (SPD), with their top candidate Olaf Scholz, are the election winners with 25.7% of the vote, an increase of 5.2 points compared to 2017. The conservative CDU/CSU lost almost 9 percentage points and could only muster 24.1%.

Despite significant gains, the mood among the Greens was subdued. Although the party managed to secure 14.8% of the vote, the result fell far short of its own ambitions and the good polling figures from the spring. The liberal Free Democratic party (FDP) became the fourth strongest force with 11.5% of the vote, a slight improvement compared to 2017. Both the right-wing Alternative for Germany (AfD) and the Left Party’s positions weakened compared to the last federal election – neither party will play a role in the coalition negotiations now pending.

Climate protection and COVID-19 were decisive for the election

Climate protection was decisive for just under half of those surveyed, and COVID-19 for one in four. Other defining issues that have often dominated in the past, such as pensions, immigration or social justice, were less decisive. Thus, a core goal of movements like Fridays for Future has been achieved: the federal election was a climate election.

The core task of the next government: climate protection

In the run-up to the election, the various party platforms were criticized by different climate movements for not including the necessary measures that would realistically allow the 1.5 degree goal, as advised in the Paris Agreement to limit global warming, to be met. The outcome of the election, with weak results for the Greens and the Left Party, which had presented the most ambitious climate protection programmes, is also not evidence of a turnaround on the issue. The mistakes of the election campaign are blamed for the weak performance of the Greens.

At the same time, however, almost every speech of the evening emphasized the importance of climate protection for the upcoming government, regardless of political party preference. Moreover, the Greens, together with the FDP, have a special role to play: barring another grand coalition, both parties will be needed to form a government in order to achieve a majority in the German Bundestag, the federal parliament. The Greens in particular now have the chance to push through their ambitions for a Paris-compliant climate policy in negotiations and thus significantly improve the framework and conditions for cleantech companies.

Possible government coalitions – exciting alliances

The shrinking of the major parties SPD and CDU/CSU and the improved performance of the Greens and FDP opens interesting options for alliances. A continuation of the grand coalition under SPD leadership appears unrealistic as no coalition that involves both SPD and CDU are likely to happen. Also unlikely are additions to this constellation of a third party. The so-called Kenya (SPD, CDU, Greens) or Germany (SPD, CDU, FDP) coalitions are not very attractive based on previous years.

This leaves two possible government options: A so-called “traffic light” coalition of SPD, Greens and FPD or a Jamaica coalition of Union, Greens and FDP. While international media such as The Economist had spoken out prior to the election in favour of a change, and thus a government led by the SPD, the German population is more undecided. According to a poll by Forschungsgruppe Wahlen, a research institute in Germany, only 28% of respondents approve of a traffic light coalition, while 47% reject it. A Jamaica coalition has 33% approval, while 49% are not in favour.

Greens and FDP as “kingmakers”

The two smaller popular parties now have three strategic advantages after the election. Both parties and their respective top personnel still know each other well from the coalition negotiations from 2017, which ultimately fell through at the time. In addition, both parties will be strengthened by their election success and will enter negotiations with the CDU/CSU and the SPD with self-confidence. Thirdly, they benefit from a tactical advantage: in the past, both parties have been in a similar situation in Schleswig-Holstein, where they first negotiated in pairs before taking soundings with the SPD and CDU. Such an approach has also already been suggested on election night and is rather unusual.

Cleantech companies benefit

Even if the concrete contents have yet to be negotiated, Important elements of an ambitious climate policy such as a socially just and Paris-compatible CO2 price or the expansion of the EU Emissions Trading Scheme are considered relatively certain. It can also be assumed that the EEG levy will be abolished by the new coalition and that ambitious targets for the expansion of renewables will be formulated. The charging infrastructure for electric vehicles will also be massively expanded in the coming years. The hot topic of hydrogen will also be of interest to the next government, with increased use in the industrial sector considered certain.

COP26 as an important climate policy signal

The timetable for the negotiations in the coming days and weeks is still unclear. There are differing estimates as to how long the coalition talks will last. However, with a view to the upcoming COP26 climate conference in Glasgow in November, it would be an important sign that the German government takes a correspondingly clear stance in favour of climate protection – entirely in the interests of the cleantech industry.

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