(Bloomberg Markets) — Angela Merkel’s slow-motion departure from the German political stage took an ironic turn in April as the chancellor tripped over a climate law she herself had drawn up. In a shock decision, judges on the country’s highest court ruled that Merkel’s faltering attempts to rewire the energy system away from fossil fuels would saddle future generations with the burden of cutting emissions. Merkel—once hailed as a climate leader, now denounced as a straggler—was ordered to speed things up.
Merkel’s cautious approach threatened the fundamental rights of young people “to a human future,” the judges said, ruling in favor of plaintiff Sophie Backsen, a 22-year-old farmer whose island home of Pellworm off Germany’s North Sea coast might disappear because of rising sea levels. Shaken by the decision, Merkel spent the following weekend in quiet contemplation while she pondered a response.
The court ruling goes straight to the heart of Merkel’s handling of the Energiewende, Germany’s multibillion-euro transition to a low-carbon future. Across her 16 years in power, Merkel the scientist—a true believer in fighting climate change—has been forced to give way to Merkel the politician. Even as she oversaw a boom in renewable energy and positioned her country as a world leader on the environment, she made substantial concessions to the coal lobby, to protesters against new wind farms, and to manufacturing, particularly carmakers.
While Merkel is lauded overseas, her stop-and-start approach has seen Germany’s city centers fill with weekly marches by school-age climate demonstrators. After unprecedented flooding hit parts of the country earlier this month, she inspected the devastation and witnessed the frustration among victims. “We stand by your side, and we will put everything in order, step by step,” she said. “That means that we have to act quickly in the short term. We see the violence with which nature can behave.”
Putting an industrial economy on the path to zero emissions was never going to be easy. Germany is home to such manufacturing titans as Volkswagen and Siemens and chemical company BASF. They go toe-to-toe against Chinese and U.S. companies that benefit from substantially lower energy prices. For a country that renounced its militarist past, prowess in energy-intensive manufacturing is central to its image at home and abroad. Slashing emissions too quickly risks destroying the foundation of blue-collar industrial jobs on which the country’s postwar social order rests.
Germany has committed more than €500 billion ($591 billion) to the Energiewende since the turn of the century, according to the Düsseldorf Institute for Competition Economics. Yet the world’s third-largest exporter after China and the U.S. still gets more than three-quarters of its energy from fossil fuels such as oil, coal, and natural gas. The country has been slow in promoting electric vehicle use and decarbonizing energy-intensive industries like steel, chemical, and food production. Had it not been for the economic crash caused by the Covid-19 pandemic, Germany wouldn’t have met its 2020 climate goals.
Meanwhile, voters thinking more and more like Backsen have grown restless at increasingly manifest signs of climate change. Consecutive blistering summers have scorched crops and sparked unprecedented forest fires. At the other extreme, a warming climate has supercharged storms, contributing to the catastrophic flash floods that killed at least 170 people in western Germany this month. When Merkel toured the afflicted areas, she said she recognized that Germany needs to step up its actions to address global warming. “Investing in climate protection is expensive,” she said, “but not having done it already proves to be even more expensive.” What she saw testified to that. “It is frightening, and there are no words in German that can describe the devastation we are seeing,” she said.
Germans now view climate change as the greatest threat to the country’s security, according to a survey conducted earlier this year for the Munich Security Conference, and shifting opinions among voters are leaving their mark on politics. Polling showed the Green party surging from an 8% vote share in the 2017 election to more than 20% during the first half of this year, dislodging the center-left Social Democratic Party as the main challenger to the ruling center-right coalition of Merkel’s Christian Democratic Union party and the Christian Social Union. While support for the Greens slipped in the summer, the party is still in the running to win the chancellorship or enter government in coalition in the Sept. 26 federal election. That’s when Merkel, 67, will stand aside.
Back at the chancellery after her weekend of reflection, Merkel took action. On Monday, May 3, she assembled a group of the CDU’s most senior politicians. Merkel, daughter of a protestant pastor, takes pride in her political firefighting skills. Elevated to the cabinet in 1991 by Chancellor Helmut Kohl, who patronized his protégé as “my girl,” she spent years puncturing the dreams of men who’ve hoped to topple the country’s first female leader.
Eschewing soaring oratory, Merkel won over voters with a reassuring manner born of a mastery of detail befitting someone with a doctorate in quantum chemistry. Her stamina and a dry, self-deprecating sense of humor helped her weather emergencies from the euro zone sovereign debt crisis that began in 2009 through to the pandemic. Interminable horse-trading became a hallmark of collective decision-making during the four coalition governments under Merkel.
Speaking forcefully to the CDU colleagues she’d summoned to the chancellery, Merkel told them that—“without any ifs or buts”—Germany’s climate law would be revised and the country wouldn’t default on its obligations to future generations.
After leaking plans to the media to steamroller the go-slow voices on her party’s right flank, Merkel’s government agreed on a plan of action on May 12: Germany would aim for climate neutrality in 2045, five years earlier than previously mandated. In doing so, Merkel set the shortest timeline of any Group of Seven country. Once again the chancellor managed to look like a climate champion. And yet her April U-turn was also a symptom of her mixed record on energy.
Although investment in renewable energy boomed during the Merkel years, her controversial decision to quit nuclear power after the 2011 Fukushima Dai-ichi disaster in Japan left Germany reliant on fossil fuel sources or electricity imports when the sun doesn’t shine and the wind won’t blow. Merkel’s critics say the Klimakanzlerin, or climate chancellor, as the media has dubbed her, hasn’t really been as brave as she seems to much of the outside world.
“The problem with Merkel is the gap between targets and actions,” says Sonja Peterson, a senior researcher and professor for climate and energy economics at the Kiel Institute for the World Economy, an economic think tank. “It is like she sets longer-term targets in order to not hurt anyone. We weren’t going in the wrong direction with Merkel; we were just not courageous enough.”
Bas Eickhout, the Dutch vice president for the Green group in the European Parliament, says Merkel has been a “conservative chancellor” who lacked consistency on climate matters and was prone to backtracking. “If you look at her results, what she is leaving behind on environment, it’s limited,” he says. “Those moments in time absolutely had an impact, but in the end it’s too limited.”
Whoever succeeds Merkel faces some repair work. In the international arena, she’s alienated allies with her unwavering support for the Nord Stream 2 natural gas pipeline link to Russia. At home, energy producers say they need more infrastructure and support to further expand the country’s renewables capacity and compensate for the loss of nuclear and coal. German heavy industry says it needs market incentives and a new legal framework to address their emissions.
“Merkel’s actions were in the right direction,” says BASF SE Chief Executive Officer Martin Brudermüller. “She took smaller steps. But now the fight against climate change has become a greater task. I hope the next government won’t focus on the small stuff, but is courageous enough to take on the big stuff.”
Merkel’s unfinished business means it will be harder for the next government to achieve the stricter climate targets set by the chancellor in her final days. If all goes well, Germany could show the world it’s possible to go green without damaging economic growth. If it doesn’t, popular support at home for the Energiewende could crumble, and other countries may wonder if their faith in the Klimakanzlerin was justified.
In March 1995, Merkel, then Germany’s environment minister, chaired COP1, the first conference of signatories to the United Nations Framework Convention on Climate Change. Held in Berlin, COP1 offered a recently reunited Germany a chance to show it would champion multilateralism after the division of the Cold War. For Merkel, 40 at the time, it was a chance to step onto a global stage.
Welcoming delegations from around the world to the International Congress Center, Merkel had one goal in mind: Get the planet’s biggest polluters to provisionally agree to legally binding emissions cuts. Hammering out a deal would be no mean feat. Scientific consensus that carbon dioxide emissions from human activity caused global warming was still tentative. Timothy Wirth, leader of the U.S. delegation to Berlin, warned that the issue wasn’t even on the radar of Americans.
For Merkel, given her science background, projections and models of the climate crisis were as real as the aluminum sheeting that wrapped the ICC’s exterior. She spent the week darting through the warren of meeting rooms and speaking chambers. Practicing a technique that she’d later hone during the international crises that punctuated her chancellorship, Merkel looked to build consensus through an exhausting series of bilateral meetings.
Breaking into tears in front of the German delegation when it seemed an agreement would slip through her fingers, Merkel rallied herself and, after a renewed effort, clinched a deal. As a result, the world had the first steppingstone to later climate pacts in Kyoto and Paris, where nations would commit to binding emissions cuts. Kohl’s “girl” had sprung from the shadows.
“It was an essential step forward,” says Rafe Pomerance, a senior member of the U.S. delegation to the COP1 conference and now a senior fellow at the Woodwell Climate Research Center in Falmouth, Mass. “The worldwide fight against climate change owes a great deal to Angela Merkel.”
Victory in Berlin marked the start of the golden years of Merkel’s climate and energy policy. In 1997, still environment minister, she headed the German delegation at the historic Kyoto meeting. In ensuing years, during which she became leader of her party when it was out of power, Merkel’s growing reputation for competence and composure on the international stage impressed Germans. In 2005 they elected her to be the country’s first female chancellor.
Merkel set to work decarbonizing Germany’s energy system, convinced that the science behind climate change left no alternative. It was an easy start. Spurred by the previous government’s feed-in tariffs—whereby households subsidize the construction of renewable installations through surcharges on their utility bills—wind and solar parks sprang up across the country. By 2010, Germany led the world in solar panel installations and was second only to the U.S. in wind turbines. Merkel overturned a plan by the previous government to phase out Germany’s nuclear power stations, insisting the country needed a clean and reliable emissions-free energy source on cloudy or windless days.
It took the 2011 meltdown at the Fukushima Dai-ichi nuclear power plant—in technologically advanced Japan—to disrupt Germany’s shift to a carbon-free energy system. Merkel immediately detected a swell of antinuclear opinion in Germany. Within two days she began to undo her decision to extend the lifetimes of the country’s reactors. The new plan called for all of them to be closed by 2022. Energy company share prices fell precipitously. Germany had to pursue Energiewende without the most reliable source of carbon-free power.
The about-face cemented Merkel’s control of the center of politics in Germany, a country where “Atomkraft? Nein Danke” (“Nuclear Power? No Thanks”) bumper stickers are a common sight and memories of the 1986 Chernobyl disaster linger. But Merkel’s previously concealed populist streak rocked her reputation as a steady hand; expectations for consistency from the chancellery went up in smoke.
In a forest badly damaged by drought that’s a three-hour drive north of Frankfurt, Stefan-Jörg Göbel is living through the tumult of Germany’s energy transition. He’s senior vice president for wind and solar in continental Europe at Statkraft AS, a Norwegian utility that’s among the largest renewable generators in the European Union. His company has secured a site on which to build a wind farm in the small town of Wesertal in the Weser river valley, a place that inspired the story of Snow White by the Brothers Grimm.
In clearings left by trees that died and were uprooted after recent droughts, Göbel’s engineers plan to install six wind turbines with a total output of as much as 36 megawatts, with operations planned to start by 2025.
Göbel’s biggest challenge isn’t an engineering one; it’s how to convince irate locals that the project should go ahead at all. He’s presented various options to residents, including selling one of the turbines to a local cooperative and doling out cash payments to the municipality. “It is good to give a share of local value creation to the local community,” Göbel says. “There is simply no way around it anyway.”
Under Merkel, delays to renewable projects have become almost commonplace. “Not in my backyard” protests, for example, have disrupted plans to build high-voltage transmission lines to carry electricity from renewable energy installations in the North Sea to the power-hungry cities and factories farther south.
The situation is so bad that the country’s largest power generator, RWE AG, is having to look abroad for growth. “Capital is very flexible, and time is very important to get the money on the ground,” says Alexander Nolden, RWE’s chief economist. “If certain conditions are not here, capital will simply shift to other places.”
With renewables lagging, Germany depends increasingly on natural gas to fill the gap left by nuclear and coal. That’s one rationale behind Merkel’s support for the €9.5 billion, 764‑mile Nord Stream 2 pipeline that’s designed to bring gas from Russia to Germany and other European countries. Merkel’s stance has sandwiched Germany between the competing wishes of two allies—Russia, whose economy depends hugely on fossil fuel exports, and the U.S., which doesn’t want Europe to be dependent on a state at odds with NATO.
Coal is another issue altogether. After more than two decades of energy transition, coal still supplies almost a quarter of the country’s electricity. Merkel knows Germany can’t meet its long-term climate targets without quitting coal, but special interest groups and political qualms have undermined her efforts to do so. Even the U.S. under President Donald Trump, who’d pledged to keep coal plants open, closed them at roughly twice the rate of Angela Merkel’s Germany: About 40 gigawatts’ worth of coal generation was retired in the four Trump years, compared with about 6GW over Merkel’s entire chancellorship. (Michael Bloomberg, the founder and majority owner of Bloomberg LP, has committed $500 million to closing the remaining coal-powered plants in the U.S. by 2030 and slowing the construction of new gas plants.)
In 2018, Merkel established an expert panel to plot the exit from coal, the country’s only native energy commodity, but the panel’s terms of reference put so much emphasis on protecting jobs (and, implicitly, votes) that coal was bound to win out. The panel set a deadline for ending the burning of coal, but it’s not until 2038.
At least the deadline recognizes the need to eliminate the use of coal, making room for cleaner sources to replace it. “The business model for conventional technologies doesn’t work anymore,” says Georg Nikolaus Stamatelopoulos, chief operating officer for generation at EnBW Energie Baden-Württemberg AG. “We could obviously try to hang on to it as long as we could, but really, the way to go is through renewables. There is no way back. Germany has no other option in the energy transition than to build up more renewables.”
Of all the special interests that fed into Merkel’s caution, none loomed as large as the auto industry, employer of 830,000 Germans and generator of one-fifth of the country’s industrial output. The level of greenhouse gas emissions from transportation has hardly budged since the end of the Cold War. Germany’s taxes on gasoline and diesel are below average levels across Europe. Cars roar along an autobahn network that’s partly speed-limit-free.
EV adoption in Germany is roughly equivalent to that of Britain but trails Norway, Sweden, and the Netherlands, according to the International Energy Agency. While carmakers such as Volkswagen AG are expanding EV production, an electric car contains many fewer parts, meaning far fewer people are needed to assemble them. Hundreds of smaller family-owned businesses building everything from spark plugs to fuel pumps face obsolescence when the combustion engine age ends.
All of which may help explain why Merkel has moved cautiously, but it doesn’t forestall criticism. “Germany has lost precious time with this approach in which not all sectors have to take action in the energy transition,” says Peterson of the Kiel Institute for the World Economy. “There is a big pressure from the society now. Climate policy is higher in the agenda than ever.”
Responding to that kind of pressure, other industrial polluters say they need government help. German conglomerates from Thyssenkrupp to BASF are seeking changes in regulations and incentives to accelerate the adoption of new technologies to replace fossil fuels that now account for 70% of manufacturers’ energy demand. “We know how to get rid of the CO2 we emit,” says BASF’s Brudermüller. “We know what technologies need to be applied. Now we need support on how to do that.”
Although Germany hit its 2020 emissions reduction goal, it did so only because of the Covid-induced economic crunch, according to Agora Energiewende, a think tank. The post-pandemic recovery will inevitably cause emissions to rise again. “Merkel’s legacy is contradictory and full of contrasts,” says Antoine Vagneur-Jones, an energy transition analyst at BloombergNEF in London. “More than anything, it speaks to a central question facing many countries targeting net-zero: Can you decarbonize an economy without deindustrializing first?”
A vision of Germany’s post-Merkel energy future glimmers in Helgoland, a windswept island 40 miles off the country’s North Sea coast. Once a practice range for Luftwaffe bomber crews and now largely known for its plethora of duty-free perfume shops, it may hold the key to greening the industrial base of Europe’s powerhouse economy.
In the icy blue waters that gird the island’s sheer cliff faces, engineers for the AquaVentus initiative are working on a project that’s become energy transition alchemy: turning wind energy and water into hydrogen, a fuel that can be used to power everything from steel mills to automobiles. The project’s wind turbines will power electrolysis machines that split water molecules into oxygen and hydrogen, a gas that flames hot and clean and doesn’t produce carbon dioxide.
AquaVentus will set up electrolysis units in the North Sea with a total capacity of 10GW by 2035, enough to produce 1 million metric tons of green hydrogen. That’s equivalent to one-tenth of the U.S.’s total annual hydrogen production, making AquaVentus one of the largest hydrogen projects in the world. Partly backed by state money, it includes a new pipeline to transport hydrogen to mainland Germany, as well as upgrades to the local port so it can handle the machinery needed for energy research. The project is pitched as a solution to two of the biggest obstacles blocking Germany’s path to a carbon-neutral future: slashing emissions in the hard-to-abate sectors of transportation and heat for industrial processes.
AquaVentus wouldn’t have gotten off the ground without Merkel’s €9 billion hydrogen strategy, which was announced last year, says Managing Director Jimmie Langham. “We, as first movers, need subsidies,” he says, adding that the announcement led to a stream of energy and technology companies knocking at his door. “That was the trigger we needed.”
Whether green hydrogen can be the clean fuel that keeps Germany’s factories humming remains to be seen. The technology is expensive, and companies such as steelmaker Thyssenkrupp AG have said they can’t afford to transition to hydrogen without government help. But Berlin’s backing of the technology will guarantee producers there’s a market for the fuel, just as the country’s feed-in tariffs kick-started global renewable manufacturing.
AquaVentus offers hope that, despite Merkel’s go-slow approach and even a U-turn or two, the shape of Germany’s energy system is not in doubt. Europe’s No. 1 economy will move forward without coal and nuclear, the conventional energy sources that powered it through the 20th and early 21st centuries. Factories churning out cars, fridges, and other “Made in Germany” items will get their electricity from renewables and industrial heat from hydrogen.
Climate change policy is sounding a coda to Merkel’s political life. A front-line career launched at the Berlin climate conference in 1995 is ending with a flurry of activity aimed at decarbonizing Germany’s energy system. Last year, Merkel’s government established a carbon tax for the heating and transportation sectors, a move that will nudge consumers to alternative heating systems or electric vehicles. Also last year, her government unveiled a €130 billion recovery budget with an emphasis on green stimulus.
It can be argued that precisely because of Merkel’s global leadership on climate change issues, she’s no longer out front alone or unchallenged. Under Prime Minister Boris Johnson, the U.K. has mandated that no more internal combustion engine vehicles be sold after 2030—a deadline Merkel has refused to set. It’s Chinese demand for EVs that pushed German automakers into thinking electric. France says it will close its last coal-fired power plant at the end of 2022, 16 years ahead of Germany. Finland aims to beat Germany to climate neutrality by 10 years.
Yet Berlin is still in the game. “Germany lost ground, but we are not out of the list,” says BASF’s Brudermüller. “We have the opportunity to take a bigger role in the future.”
Merkel’s harshest critics—usually Germans—accuse her of uttering noble words devoid of action and of surrendering to powerful interest groups, most notably the automakers. Her defenders say she’s introduced tools and policy dials that her successors can adjust to cut emissions faster when public opinion supports it. The reality is that Merkel has been in power so long, and her leadership has been so consequential, that it will take years before a clear judgment on her energy legacy can be made. —With Nicholas Comfort, Arne Delfs, and Ewa Krukowska
Wilkes covers industries and Dezem covers energy and renewables, both in Frankfurt