The German federal election on September 24 saw historical losses for the traditional parties, Chancellor Angela Merkel’s conservative CDU/CSU and the center-left Social Democrats (SPD). With only 33% of the vote, the CDU/CSU received its worst result since 1949. The SPD, on the other hand, deflated to 20.5% of the vote — its lowest result since the founding of the Federal Republic.

At the same time, the country’s smaller parties benefitted from voter fatigue with the grand coalition’s perceived consensus-driven politics: While the gains of the Left Party (9.2%) and the Greens (8.9%) were fairly small, the liberal FDP took one of its best results ever with 10.7% of the vote. It is the 12.6% of the populist right AfD, however, that marks a turning point in German federal politics: The AfD is the first nationalist party to sit in the federal parliament in 60 years and it is likely to produce a different tone and dynamic among the members of parliament.

Tough coalition talks ahead

Nevertheless, the results pave the way for Merkel to enter her fourth term as the Chancellor of the Federal Republic. Her big challenge will be to form a stable and effective coalition government. With Sunday’s results, only two coalitions would enjoy majorities in parliament: a continuation of the “grand coalition” and a tie-up of the CDU/CSU, the FDP and the Greens — the so-called “Jamaica” coalition. On Sunday, however, the SPD was quick to announce it would head into opposition rather than serve another term as junior partner, leaving the CDU with only one feasible coalition option.

But the political differences between the Greens, the FDP and the CSU promise to create significant hurdles for the coming negotiations. Especially energy and climate issues have the potential to become one of the most contentious topics next to refugee and immigration policy. Although energy and climate policy did not receive much attention in the election campaign, it is likely to do so in the negotiations, as these questions are at the core of the Greens’ election program. The positions of the FDP and the Greens on the future of the diesel, coal power and the expansion of renewable energy vary tremendously. But the right-center CSU could also prove challenging on energy policy, most importantly when it comes to the expansion of the power grid and the subsidy scheme for renewable energy.

Potential negotiation tactics

To form a “Jamaica” coalition, Merkel’s CDU now has two options: First, to let each of its coalition partners focus on their core competencies, not intervening in the realm of the other. In this scenario, the Greens’ vision would be dominating energy and climate policy, most certainly leading to, among other things, a rather quick coal phase-out and an accelerated expansion of renewable energy. The other potential path is to find joint projects between the four parties, also with regard to energy policy. In this scenario, the coalition would have a stronger market-liberal orientation while holding on to the climate targets set out in the Paris Agreement. Market instruments such as CO2 prices would be introduced to ensure climate targets are met. A reform of the European emissions trading system would seem inevitable.

Another area with great potential for agreement is digitalization. In their election programs, all three parties identified digitalization as one of the most important projects of the future. The digitalization of the energy sector bears great potential for energy efficiency. This combined with financial incentives for the energetic restoration of buildings could become another joint energy project of a “Jamaica” coalition. Another compromise could be a lowered electricity tax, which the Greens and the FDP both favour.

The Greens will interpret their election result as showing that a significant part of the German population puts great value on climate and environmental issues. They will seek to use this momentum to push their idea of a green energy and transport future. While they may backpedal on some of their demands, such as a set end date for combustion engines, it might be more painful if not unacceptable for them to enter a coalition without a fixed end date for coal-fired power plants in Germany or specific statements on the climate targets for 2020 and 2050. As the CDU/CSU also plans to phase-out coal in the long-term, it seems unlikely that the FDP will strongly oppose this position. If this will give natural gas as bridging fossil fuel a new push in the climate goal debate remains to be seen.

Not everything has changed

While a “Jamaica” coalition would certainly set for a new course, the key individuals relevant to energy and climate issues will, for the most part, remain the same as in the last federal parliament. Despite the historic losses of the traditional parties, all members of parliament of the CDU/CSU, the SPD, the Greens and the Left Party who are relevant to energy and climate topics are back in parliament, except for those who did not run for a seat again. Although elected SPD MPs are now part of the opposition, it seems unlikely they will deviate from their positions on energy policy communicated prior to the election (see H+K blog). With Hermann Otto Solms, the FDP has only one distinguished energy expert in parliament.

Merkel is in an unenviable position as her CDU faces the toughest coalition talks in decades. It is more than 50 years ago that a head of government had to form a coalition with four (given that the CSU, the CDU’s Bavarian sister party, puts great emphasis on being a party in its own right) parties to stay in power.

Thomas Wimmer, Managing Director
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