The Environment and Climate Change Law Review: Germany
Under the Basic Law for the Federal Republic of Germany (GG), the protection of the natural foundations of life and animals is a fundamental state objective. Mindful also of its responsibility towards future generations, the state shall protect the natural foundations of life and animals through legislation and, in accordance with law and justice, by executive and judicial action (Article 20a GG). Although this principle was embedded in the German Constitution no earlier than in 1994, the German state and German federal states have had a long tradition of environmental protection. This is particularly the case regarding the prevention of harmful effects of industrial installations on air, water and soil, the remediation of contamination and the use, storage, transport and disposal of hazardous substances.
Whereas environmental law has evolved consecutively and changed in an evolutionary manner (e.g., regarding specific areas of protection), climate change prevention has triggered and will continue to trigger rather systematic changes. At first, these changes mostly concerned (environmental) energy law, but in the past years climate protection politics and climate protection legislation have gained further momentum in Germany in the wake of the global public demand to stop climate change. Accordingly, climate protection has been a key justification in the German 'energy turnaround', which aims to phase out nuclear energy by 2022, consecutively phase out energy production from lignite and hard coal by 2038 at the latest, reduce other fossil energy sources, promote renewable energy sources and introduce hydrogen as a decarbonisation solution where electrification is technically or economically unfeasible.
More recently, the German Federal Constitutional Court ruled that Article 20a of the GG also imposes a climate protection obligation on the German legislator. The court found that the climate protection targets set until 2030 did not sufficiently account for the burden put on future generations. Because of this judgement, the German legislator further accelerated the path to climate neutrality.
No different from any other Member State environmental law within the European Union, EU law has had great influence on German environmental law. With specific regard to German laws and regulations on environmental protection and climate change discussed in this chapter, these laws are manifold and not comprehensively codified. The reasons are primarily of a historic nature and are based on the division of legislative powers for environmental law between the German federation, on the one hand, and the 16 federal states, on the other hand. For the most part, the different laws focus on particular subjects of protection (i.e., air, soil and water) or sources of hazards (e.g., industrial installations). Some laws have more comprehensive legal objects, such as nature conservation or liability for environmental damage in general. Environmental laws are often further specified in more detail in related ordinances as well as administrative regulations.
Most important for industrial installations is the German Federal Emission Control Act (BImSchG), which regulates various kinds of industrial facilities. Environmental protection is already taken into account for the construction permits of these installations, in particular, in connection with the provisions of the Environmental Impact Assessment Act and the Federal Nature Conservation Act. Regarding the operation of such facilities, the BImSchG aims to protect the environment from air or water pollution, noise emissions, vibrations and comparable harmful impacts mainly by limiting or avoiding emissions. Currently, 35 ordinances (BImSchV) specify, in particular, technical details of the basic duties under the BImSchG. Also of great practical importance, in particular, regarding emission thresholds, are two administrative ordinances: the Technical Guidelines on Noise and the Technical Guidelines on Air Quality (TA Luft). The European framework for trading of greenhouse gas (GHG) emissions is transposed in the Greenhouse Gas Emission Allowance Trading Act (TEHG), which links environmental protection to climate protection by establishing a cap and trade system for the amount of permitted emissions. In addition to the TEHG, in 2019 the legislator introduced a new act establishing a national GHG emission trading system for the sectors transport and building (BEHG). The German Act on Carbon Capture and Storage, however, has hardly gained any practical relevance for the reduction of GHG emissions yet.
In addition to protection and prevention efforts, liability for nevertheless present or occurring contamination of soil and groundwater is governed by the Federal Soil Protection Act (BBodSchG), the Federal Soil Protection Ordinance (BBodSchV) and by the Federal Water Act (WHG), as well as water laws of the federal states. The BBodSchG particularly applies to harmful soil changes and contaminated sites, whereas the water laws apply to significantly detrimental changes to bodies of water. In addition, environmental damage caused by business activities potentially dangerous to the environment may result in liability under the Federal Environmental Damage Act. Operators of certain installations may also be liable for damage (including third-party damage) caused by their facility under the Environmental Liability Act.
Manufacturers and importers, as well as downstream users of specific substances, are further subject to restrictions regarding the use, distribution and labelling as well as registration of these substances pursuant to the Chemicals Act (ChemG), the Chemicals Prohibition Ordinance (ChemVerbotsV), the Ordinance on Hazardous Substances (GefahrstoffVO) and a variety of other ordinances, including the Chemicals Climate Protection Ordinance (restricting fluorinated GHG emissions), which largely makes reference to European law. The handling and disposal of waste is regulated by the Waste Management Act (KrWG) and various related ordinances.
Since November 2019, the Climate Protection Act (KSG) has set out sector-specific climate protection targets, which must be achieved by supplementary legislation. In addition to the above-mentioned TEHG and BEHG, climate protection targets are part of several sector-specific laws and regulations aiming to reduce GHG emissions, and promote renewable energy and energy efficiency. In the energy sector, this includes, in particular, the Energy Industry Act (EnWG) setting out basic principles of energy law, the Renewable Energy Sources Act (EEG) and the Wind Offshore Act, which promote electricity generation from renewable energy sources, and the Combined Heat and Power Act (KWKG) on promotion of combined heat and power technology (CHP).
As German environmental law consists of different laws on the federal level as well as on the level of the federal states, different authorities are competent to enforce environmental and climate change rules. Supreme authorities at both federal and state level are the respective ministries for environmental protection as well as energy. Of particular relevance during the current parliamentary term are the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, as well as the Federal Ministry for Economic Affairs and Climate Protection. In their respective areas of responsibility, the ministries supervise the general administrative tasks of the higher federal environmental authorities, such as the Federal Environmental Agency, the Federal Agency for Nature Conservation and the Federal Office for Economic Affairs and Export Control. The same applies for the higher environmental authorities of the federal states. In some areas of environmental law, such as mid- and long-term disposal of nuclear waste and radiation protection, special environmental authorities, such as the Federal Office for Radiation Protection, enforce compliance with the provisions of these particular regulations.
At the federal level, the further substructure of environmental agencies differs. In some federal states, such as North Rhine-Westphalia, regional governments are, inter alia, competent for larger projects, such as power plants, and supervise the administration of the local environmental authorities. Other federal states, such as Lower Saxony, changed the three-tier administrative structure into a two-tier structure. In this more localised structure, trade and industry authorities are competent, for example, for permits under the BImSchG.
Where environmental authorities must enforce environmental rules against other parties (see Section IV), the administrative courts ultimately decide whether or not any administrative order, sanction or decision on fees or costs is lawful and must be complied with. However, more often than not such disputes are settled at the administrative level.
Environmental, technical, health and safety standards have increased and multiplied in recent years under German law, in particular, based on the implementation of EU standards. This exposes operators of industrial plants, managing directors as well as employees to liability risks at different levels ranging from reputational damage and civil liability to administrative sanctions and criminal punishment.
Environmental obligations regularly address the operator of an installation and therefore the respective company. In the case of violations of such environmental obligations, operators of industrial plants will mainly face administrative sanctions, as well as civil claims under the law of torts brought by third parties who suffered damage to their protected rights (body, health and property). In addition to imposing administrative fines, the competent authority may suspend or revoke permits and prohibit non-compliant activities and order remediation measures. Managing directors and other individuals involved in violations of environmental standards may face (external and internal) civil claims and criminal charges. In contrast, to date German criminal law has not recognised criminal responsibility of corporations, but has only allowed for the imposition of administrative fines on corporations if a person committed an administrative offence that also violated duties of the respective company or worked for the benefit of that company. Although the German Federal Government in 2020 adopted a bill revising the overall framework for sanctioning corporations (VerSanG), the German parliament did not pass the bill in its last term. Following the general federal elections of September 2021, the new government would have to re-introduce the bill.
Whereas most infringements of environmental law are dealt with by administrative offences law, criminal sanctions in connection with violations of environmental obligations may result from general criminal offences, such as offences against bodily integrity or damaging property, as well as specific environmental criminal offences. The latter, inter alia, prohibit pollution of water, soil and air, unauthorised dealing with dangerous waste, unauthorised operation of an industrial plant requiring a permit under the BImSchG or endangering areas requiring protection such as water protection areas. Particularly serious cases of environmental crime, such as acting out of greed, are punished with imprisonment of not less than six months and up to 10 years. However, environmental criminal offences depend on the infringement of applicable environmental law. Consequently, acting in accordance with public environmental law or a permit or beneficial administrative act cannot constitute a criminal offence.
In addition to public enforcement, the Environmental Appeals Act enables recognised environmental associations to challenge decisions and permissions regarding certain environmentally sensitive projects. Without this privilege, only persons individually affected by the respective project would be able to take legal action under general principles of German administrative law.
Following the diesel emissions scandal, which led to the admission of car manufacturers to having used software manipulating emissions controls, the German legislator introduced a model lawsuit procedure enabling consumers to join a lawsuit without assuming any legal risks, thereby providing for an indirect contribution to air pollution control.
Reporting and disclosure
In Germany, there is no general legal obligation to provide the authorities with contamination-related information. However, specific notification requirements especially exist in the (partially different) laws of the federal states. In general, the polluter, his or her universal legal successor, the current or former owner and the occupant must notify the competent authority of indications of contamination of real property. Similar obligations apply in the case of release of substances hazardous to water. Facilities handling substantial quantities of harmful substances, inter alia, must report to the competent authority explosions, inflammations or release of a certain amount of hazardous substances, damage to persons or real estate and certain direct damage to the environment.
Without constituting a notification requirement in the strict sense, the notification of a present or ongoing contamination to the authorities can, under certain circumstances, also be a means to avoid or mitigate responsibility under criminal law. There is currently no particular protection for whistleblowers under German law, which will, however, likely change with the implementation of the EU whistleblower directive (deadline 17 December 2021).
Potential disclosure obligations in relation to prospective purchasers are subject to civil law. Not disclosing known or suspected environmental liabilities may amount to fraudulent misrepresentation and thereby give cause for annulment of a contract. Unknown environmental liabilities may trigger warranty rights subject to contractual arrangements.
Regarding financial reporting obligations, environmental incidents may gain such financial importance for the performance of a company that they must be mentioned in corporate reports in accordance with general reporting standards. Major corporations additionally must report on environmental matters in their situation report, including environmental protection strategies and programmes, preventive measures, compliance with environmental standards, use of energy and water, as well as emissions and waste management.
i Air quality
The protection of air quality is foremost subject to maturely developed emissions law. Under the BImSchG, the construction and operation of facilities that are particularly likely to cause harmful effects to the environment, or otherwise endanger or cause significant disadvantages or significant nuisances to the general public or the neighbourhood, require a specific emission permit. The main criteria determining the permit requirements are the materials used or produced and the functions of the facilities as well as the production volumes. The respective facilities are listed in the 4th BImSchV.
The TA Luft specify emission values for all relevant airborne pollutants. On 23 June 2021, the federal government adopted a new version of the TA Luft that, in particular, sets lower emission values by reference to the BAT conclusions, and incorporates and expands the previous administrative guideline on odour emissions. In addition, new types of installations and harmful substances have been included in the scope of the TA Luft. Finally, the new version also provides for a more specific procedure for assessing harmful effects on the environment and health in the surrounding of installations that require a permit. The competent authority shall periodically monitor air quality (Sections 44 ff, 40 BImSchG), for example, regarding air pollution caused by traffic. In this case, the competent authority may restrict or prohibit the use of motor vehicles.
The permit under the BImSchG covers not only emissions originating from the respective plant but also other public law requirements, in particular, under building law (the concentration effect). The permit typically contains collateral clauses and regulations specifying the content of the permit. A modification or alteration of an existing plant must either be notified to the authority or – in the case of material alterations – will require a new permit.
If an emitting plant is constructed, altered or operated without the required permit, the competent authority may order the operator to shut down or even demolish the plant. In addition, the operator's misconduct may constitute a criminal offence. If an operator holds a permit but does not comply with the applicable requirements, the competent authority may order remedial measures by way of a subsequent order or may prohibit the operation of the plant. If an operator or owner finally ceases the operation of a plant, he or she is obliged to take necessary measures to return the site to a satisfactory state, for example, by demolishing the installations.
ii Water quality
Water quality in Germany is, inter alia, protected by the provisions of the WHG. Under this Act, certain practices with possible detrimental effects on natural water resources require permission and are subject to certain provisions. In particular, installations for handling substances hazardous to water must be built and operated in such a manner that no contamination of water or any other detrimental change of its properties is to be feared. Currently, specific technical requirements for such installations, including reporting and safety requirements, are regulated by the Ordinances on Installations for the Handling of Substances Hazardous to Water of the federal states, whereas the obligations of operators are regulated in the Ordinance on Installations for the Handling of Substances Hazardous to Water.
Installations handling substances hazardous to water must be tested and classified with respect to their properties. Substances are classified based on the Administrative Regulation on the Classification of Substances Hazardous to Waters. According to this regulation, there are three water hazard classes (WGK): WGK 1, a low hazard; WGK 2, a hazard; and WGK 3, a severe hazard.
Under German law, a company that handles, stores or uses chemicals and other hazardous substances, in particular, explosive, oxidising, flammable or toxic substances, must comply with certain safety regulations and provide safety measures as stipulated in the above-mentioned ChemG, ChemVerbotsV, GefahrstoffVO, the Technical Rules for Hazardous Substances, the Industrial Safety Ordinance and the Technical Rules for Safety in Work Places.
A company storing hazardous substances must prepare a comprehensive risk assessment determining the necessary occupational safety measures for the working place described. For example, hazardous substances must be stored in containers that cannot be mistaken for containers containing food regarding the packaging (label, shape). The employer also must appoint a duly qualified responsible person observing compliance with labour safety and protection regulations.
Facilities handling substantial quantities of harmful substances are also subject to the additional requirements of the Ordinance on Hazardous Incidents, including precautions to prevent hazardous incidents and enhanced safety measures, as well as notification and reporting obligations. To this end, the Ordinance provides a general concept to prevent major accidents in such areas. The operator must develop an individualised concept, including a safety management system, to prevent major accidents before starting to operate the respective facility. In addition, the operator might be subject to increased duties, for example, to submit a safety report and an alarm and hazard control plan and to fulfil certain information requirements.
The transport of dangerous goods is also subject to special regulations under German law, including the Dangerous Goods Transportation Act and several ordinances. The transport of dangerous goods is generally only permitted if all required safety regulations are fulfilled. A safety adviser must be appointed if a company takes part in the transport of dangerous goods by railroad, aircraft, sea or land vehicles.
iv Solid and hazardous waste
German waste law as provided by the KrWG and various ordinances regulates the handling and disposal of waste. According to the KrWG, waste first must be avoided and second must be recycled or recovered or be used to produce energy. Waste that is not recycled must be disposed of in accordance with basic principles of waste management guided by public interest (waste hierarchy). To ensure such disposal, records of proper waste management must be prepared.
Special regulations apply to the disposal of certain waste substances not covered in the KrWG (e.g., nuclear fuel and radioactive substances or wastewater, which are subject to the national and federal water laws).
Following the nuclear phase-out in Germany by the end of 2022, the final storage of radioactive substances and nuclear fuel is a major challenge. In this regard, the Site Selection Act contains procedural steps for a science-based and transparent search and selection of a suitable site for the safe storage of highly radioactive waste. The selection process shall be completed by 2031 and the repository shall be operative by the middle of the century.
v Contaminated land
The liability for environmental contamination is mainly governed by the BBodSchG, the BBodSchV and by the federal and state water laws. The BBodSchG particularly applies to harmful soil changes and contaminated sites, such as former waste disposal and industrial sites. Harmful soil changes within the meaning of the BBodSchG are harmful impacts on soil functions that are able to bring about hazards, considerable disadvantages or considerable nuisances for individuals or the general public. This damage may be caused by contamination, but also by a compression or dehydration of the soil. The BBodSchG applies to all currently existing known and (still) unknown and all future harmful soil changes.
The BBodSchG stipulates a general remediation liability irrespective of involvement, fault or knowledge of such contamination. This responsibility applies to:
- the polluter;
- his or her universal legal successor;
- the current and, in the case of a sale after 1 March 1999, the former owner;
- the current occupant of the real property (e.g., the lessee); and
- persons or entities that, under commercial or corporate law, must answer for an entity that owns contaminated real property, or persons or entities that gave up ownership of such properties.
The competent authority may decide which person or entity shall be held liable for remediation measures, subject to the authority's discretion, guided by the consideration of which party will be able to carry out remediation most efficiently. This applies regardless of private law agreements about the responsibility for contamination, as can be found, for example, in lease contracts. To balance potential conflicts resulting from these statutory and administrative principles, the BBodSchG provides for compensation among the several responsible parties if the authority only requested a limited number of parties or only a certain party to carry out the remediation. The obligation to pay compensation and the amount of compensation depend on the extent to which the harmful soil changes or contamination was actually caused primarily by one party or another. By consequence, this provision de facto establishes a restricted 'polluter pays' approach.
As soon as contaminated soil is excavated in the course of construction or remediation works, it no longer falls within the scope of the BBodSchG. Instead, it may qualify as waste pursuant to the KrWG, which may result in additional disposal costs. An administrative provision by the Federal States' Working Group on Waste stipulates six categories on a contaminant-threshold basis for a proper and safe recycling or disposal of landfill. While landfills in categories Z 0, Z 1 and Z 2 may be recycled – subject to restrictions in Z 1 and Z 2 – by means of use for construction works, waste in categories Z 3 to Z 5 may only be disposed of on waste disposal sites. Although these rules are only (legally non-binding) guidelines, they are often used by the respective authorities as the relevant standards.
An Ordinance on Secondary Construction Materials is still in the legislative process, but is expected to enter into force within the next two years. It will establish binding and unified rules for the use of mineral secondary construction materials in Germany. The amendments also include a revision of the BBodSchV, which sets out the requirements for soil protection in more detail.
On the basis of the global trend of decarbonisation, international and European law have always had great influence on German climate protection regulations. To date, different environmental laws have identified climate protection as one of their objectives and either aim to reduce GHG emissions, improve energy efficiency or promote renewable energies to facilitate and protect that objective. More recently, however, climate protection has been at the core of more dedicated legislative action paving the way for an independent discipline of climate protection law.
i Climate protection legislation
In 2010, the German government's initial commitment was to reduce GHG emissions by 55 per cent compared to 1990 by 2030 and by 80–95 per cent by 2050. In 2016, the German federal government adopted the Climate Action Plan 2050, which is a long-term climate protection strategy that defines a number of key areas for specific action (i.e., energy, building, transport, trade and industry, and agriculture and forestry) with both guiding principles until 2050 and milestones and targets for 2030.
In 2019, the KSG set legally binding climate protection goals for the first time in German legal history. The law provided for an overall reduction of 55 per cent by 2030 and sector-specific targets in energy, industry, transport, construction, agriculture and waste management, as well as in other sectors. In its landmark decision of 24 March 2021, the German Federal Constitutional Court found that the KSG violated fundamental rights by placing a disproportionate burden on future generations. In order to comply with this ruling, the German legislator amended the KSG and accelerated the German path to climate neutrality. By 2030, total GHG emissions are not to be reduced by 55 per cent but 65 per cent, by 2040, even 88 per cent and, by 2045, net greenhouse neutrality is to be achieved. From 2050, the KSG even requires negative GHG emissions. In the energy sector, for example, GHG emissions must decrease from 280 million tonnes of CO2 in 2020 to 108 million tonnes of CO2 in 2030. In the industrial production sector, emissions must decrease from 186 million tonnes of CO2 in 2020 to 118 million tonnes of CO2 in 2030.
A major contribution to the reduction of GHG emissions will be made by the phasing out of electricity production from lignite and hard coal under the Coal Exit Law (KVBG) of 8 August 2020. For lignite, the KVBG sets a shutdown schedule, including a total of €4.35 billion of compensation. For hard coal, the KVBG foresees a tender procedure for compensation payments to incentivise operators to take capacity off the grid until 2026. The first auction took place in 2020 and took more than 4 GW of hard coal-fired generation off the grid at a remuneration of between €6,047 and €150,000 per MW. The second auction in 2021 removed a further 1500 MW off the grid. The maximum successful bid amounted to €59,000 per MW. Successful bidders will no longer be allowed to burn coal from 8 December 2021. Unlike the first two auction rounds, the third auction was slightly undersubscribed with a remuneration of between €0 and €155,000 per MW. Subsequent auctions will follow until 2026 at degressive remuneration rates. From 2027 onwards, the hard coal phase-out shall be subject to forced shutdowns. By 2022, the share of coal-fired power generation from hard coal and lignite-fired power plants shall be reduced to around 15 GW each. By 2030, further reductions to around 8 GW are planned for hard coal-fired power plants and 9 GW for lignite-fired power plants. Under the KVBG, the overall phasing out of coal-fired power generation shall be completed by 2038 at the latest. However, following the general federal elections in 2021, discussions on an earlier exit date of around the year 2030 have intensified.
ii Greenhouse gas emission allowance trading systems
Since the end of 2019, two different GHG emission allowance trading systems have applied in Germany. The EU-law based TEHG has for some time regulated the reduction of greenhouse emissions in the energy sector and production industry. In addition, the BEHG implements a national GHG emission trading system for the sectors transport and building. From 2021 onwards, companies placing fossil fuels on the market are obliged to acquire emission allowances for the GHG emissions caused by their products. The BEHG is supposed to increase the prices for petrol and heating oil, but will also increase the market prices for all products that depend on the use of fossil fuels. Exemptions, however, apply for industrial sectors covered by the EU ETS in order to avoid double taxation. In October 2020, an amendment to the BEHG increased the certificate price for 2021 from €10 to €25 per tonne of CO2, rising steadily to €55 per tonne of CO2 by 2025. The previous price corridor of €35–60 by 2026 was increased to €55–65.
Under the existing THEG, an installation that emits GHGs from activities listed in Annex 1 TEHG requires a GHG emissions permit. If a permit in terms of the BImSchG has been issued prior to 1 January 2013, this permit also constitutes the required emission permit. Otherwise, a separate emissions permit is required.
Operators of emitting installations must cover their actual GHG emissions by emissions certificates. These allowances are issued as tradable rights so that the beneficiary may either sell surplus allowances or obtain additional allowances if required. Compared to the previous two trading periods, the general national cap for emission allowances, as well as the number of emission allowances allocated to the operators free of charge, has been reduced; the number of auctioned allowances has generally increased. In the energy sector, all allowances have been auctioned since 2013.
In January 2019, the TEHG was revised to meet the requirements of the EU Emissions Trading Directive for the fourth emissions trading period from 2021 to 2030. The overall number of emission allowances will further decline at an annual rate of 2.2 per cent from 2021 onwards, compared with 1.74 per cent in the third trading period. In addition, the EU market stability reserve accelerates the reduction of surplus certificates.
Emission allowances must correspond to an annual emission report, which must be submitted by the operators to the competent authority by 31 March of each year. If an operator exceeds the annual volume of emissions contained in the allowances and fails to buy the required additional volume, a fine of €100 per tonne of GHG emitted will be imposed on him or her and his or her name will be published accordingly.
iii Decarbonisation by use of hydrogen
Reducing carbon emissions is particularly difficult to achieve in industrial processes and economic sectors, such as regarding steel or cement production. As an interim solution, the discussion on the use of hydrogen (blue hydrogen) has recently gained momentum until sufficient renewable energy sources are available to produce clean hydrogen (green hydrogen). In June 2020, the German government published its national hydrogen strategy covering the funding of several billion euros for different ways to explore and further develop this technology.
The regulatory framework, however, is still fragmented. On the production side, licensing requirements under BImSchG exist for onshore electrolysers but, to date, not for offshore installations. The parallel increase of offshore electricity and offshore hydrogen production still needs to be sorted out. The legislator has also reduced part of the taxes and levies on electricity used for hydrogen production but has not yet initiated comprehensive reform steps. For pure hydrogen networks, the amended EnWG of 27 July 2021 provides for an opt-in regulation that covers certain unbundling rules, network access as well as network fees. Under the new Hydrogen Network Fee Regulation, operators of regulated hydrogen networks can expect a return on equity rate of 9 per cent for new assets and 7.73 per cent for old assets. The rather high interest rates are supposed to work as an incentive for the development of hydrogen networks in general but also for the opt-in into the regulation.
iv Promotion of renewable energy sources
GHG emissions, in particular in the energy sector, are indirectly reduced by the promotion of electricity production from renewable energy sources. In recent years, the renewables share within the overall production has increased steadily and reached approximately 46 per cent in 2020. With industrial electricity demand decreasing during the covid-19 pandemic, the share of renewables in overall electricity production peaked at 55.8 per cent in the first half of 2020. The EEG 2021 then set the target of 65 per cent renewable energies in the electricity sector by the year 2030 as well as climate neutrality of electricity production and consumption by 2050.
In Germany, different statutory support mechanisms have been in place since 1991. Since 2000, the applicable regulations have been set out in the EEG. The type and amount of support generally depend on the time the installation first commenced operation and the type of renewable energy. Although the promotion system has been changed constantly, the applicable legal framework for a renewable energy installation is being grandfathered for a period of 20 calendar years plus the year in which the installation was commissioned. As a consequence, different promotion systems apply to different installations. However, there are four main types of promotion schemes: fixed feed-in tariffs, voluntary direct marketing with market premium, mandatory direct marketing with market premium and tender procedures with a 'pay-as-bid' remuneration.
Until 2012, fixed feed-in tariffs were the only applicable statutory support scheme. These tariffs are paid to the operators of the installation by the connecting grid operators and ultimately charged to the end customers in form of the EEG levy. Beginning with the EEG 2012, operators of RES installations can also opt to sell their electricity directly to third parties. Any shortfall of the technology-specific market values compared to the statutory feed-in tariffs is compensated through a market premium. While direct marketing was optional under the EEG 2012 and remains optional for existing installations, it became mandatory for most new installations under the EEG 2014 to facilitate further integration of renewable energies into the electricity market. Finally, under the EEG 2017, funding for certain installations is no longer based on fixed statutory tariffs since 1 January 2017, but rather subject to an auctioning system resulting in a 'pay-as-bid' remuneration.
The promotion of offshore wind installations is regulated separately in the Wind Offshore Act (WindSeeG). An amendment of the WindSeeG of October 2020 raised the expansion target from 15 GW to 20 GW by 2030 and set a long-term expansion target of 40 GW by 2040. The legislator expects that the auction proceedings will at least for some offshore wind spots result in zero public funding.
In addition to the EEG, the Act on the Promotion of Renewable Energies in the Heat Sector promotes the use of renewable energy sources for the production of heat with the aim of reducing the use of fossil fuels. The promotion is mainly in the form of obligations to use renewable energy sources in new houses and – depending on the laws of the federal states – also in existing buildings. Such use is also partly state funded.
In the transport fuel sector, the use of renewable energy in the form of biofuels is promoted by tax allowances and a mandatory marketing quota of biofuels for oil companies under the BImSchG.
v Energy efficiency regulations
Energy efficiency is another way of indirectly reducing GHG emissions. An important part of energy efficiency is the utilisation of heat generated in the regular process of electricity production via the promotion of CHP installations. Whereas CHP based on renewable energies is promoted under the EEG, CHP based on fossil fuels is promoted by the KWKG. Operators of CHP plants receive a bonus on their electricity production per kWh, which is ultimately charged to the end customers in the form of the KWKG levy.
On 1 January 2019, the promotion scheme for CHP was adapted. Under the new law, existing CHP plants with an electrical CHP power of more than 300 MW no longer qualify for funding. Existing installations with electrical power exceeding 50 MW electrical CHP power will receive lower funding compared to the previously applicable 1.5ct/kWh. The eligibility for funding of new CHP plants exceeding an electrical CHP power of 50 MW will be assessed by the Federal Office for Economic Affairs and Export Control prior to commissioning of the installation. An amendment to the KWKG passed alongside the KVBG will create incentives to replace coal-fired CHP with modern CHP systems.
The Building Energy Act of 1 November 2020 integrates and refines previously applicable regulations on energy-saving construction of buildings and energy-saving operations. The Act on Energy Efficiency Labelling and the Ordinance on Energy Efficiency Labelling require information on the energy consumption of the specific product. The Energy-related Products Act prescribes an eco-friendly design for energy-using products, as well as products influencing the energy use of other products.
Outlook and conclusions
Despite the effects of the covid-19 pandemic, Germany in 2021 continued its path to climate neutrality, in particular by increasing climate targets under the KSG and by starting to shape the regulatory framework for hydrogen. Following the general federal elections in September 2021, further measures have been agreed between the political parties forming the next German Federal Government, including (yet again) increased renewable energy targets and an earlier phase-out of electricity production from coal and lignite. Consequently, further developments and changes to the legislative framework must be expected in the near future and in the long term.
1 Dirk Uwer is a partner and Moritz Rademacher is counsel at Hengeler Mueller Partnerschaft von Rechtsanwälten mbB.