Germany’s new coalition has outlined a transformative energy strategy focused on sector reform, competitive pricing, and maintaining the country’s global industrial leadership. The Christian Democratic Union (CDU), Christian Social Union (CSU) and the Social Democratic Party (SPD) agreement sets out a structural reform agenda centred on decarbonisation, hydrogen deployment, clean technologies and resilient infrastructure development.
The coalition document begins by stating that Germany will tackle structural transformation “through investment, innovation and competitiveness”, with industry at its core. The energy package combines financial incentives, regulatory reform and support frameworks for emerging technologies.
Hydrogen and carbon capture: a pragmatic pathway for heavy industry
One of the key pillars of the new energy plan is the accelerated development of the hydrogen economy. “The hydrogen backbone must link industrial centres across the country, including the south and east,” the coalition affirms. The Wasserstoffkernnetz (core hydrogen network) is to be developed nationwide and prioritised. A technologically neutral approach is confirmed: “In the scale-up phase, we will use all colours of hydrogen.”
Simultaneously, the coalition will immediately table legislation enabling the use of carbon capture and storage (CCS) technologies in sectors with hard-to-abate emissions, such as heavy industry and gas-fired power plants. This signals a pragmatic turn that acknowledges the difficulty of fully eliminating emissions in some industrial processes.
“The steel industry is of strategic importance and must be supported on its path to climate neutrality,” the document states, adding that CCS and increased scrap recycling will both be promoted as decarbonisation strategies.
Energy market: competitiveness and structural reform
Germany will pursue a more competitive energy system. The coalition plans to eliminate the gas storage levy and secure “permanently low, predictable, and internationally competitive” energy prices. Additional measures may be introduced if these targets are not met, reflecting a strong pro-industry orientation.
The coalition also pledges to simplify permitting processes for industrial installations, fully implementing EU directives into national law without additional burdens. Measures will be taken to sharply reduce approval timelines, especially for decarbonisation projects.
Green finance and industrial incentives
To finance this energy transformation, the government will establish a Germany Fund (Deutschlandfonds) with at least 10 billion euros in federal capital, leveraged with private investment to reach a total fund size of 100 billion euros. The fund will focus on German SMES and scale-ups. The existing Future Fund (Zukunftsfonds) will also be extended beyond 2030.
“We will subject the entire start-up financing architecture to an ‘efficiency check’,” the document affirms, aiming for greater agility and strategic focus. Moonshot technologies will be supported through milestone-based financing, with targeted support for female-led ventures.
Electric transport, incentives and charging infrastructure
The agreement includes a wide range of measures to support transport electrification. The government will extend vehicle tax exemptions for electric cars until 2035 and raise the price threshold for tax deductions to 100,000 euros for company vehicles.
Additional incentives include a special depreciation allowance for electric vehicles, and a new support scheme for low- and middle-income households funded by the EU Climate Social Fund, to facilitate access to clean mobility. Zero-emission trucks will also remain exempt from road tolls beyond 2026, and there will be dedicated funding for hydrogen charging infrastructure for heavy-duty transport.
“We will accelerate the rollout of a nationwide fast-charging network for both cars and trucks,” the document confirms, with a strong emphasis on commercial depot charging.
Clean technologies and industrial decarbonisation
The transition will be accompanied by market instruments to boost demand for climate-neutral products, such as green steel and renewable gas quotas, as well as public procurement criteria. Should the EU’s Carbon Border Adjustment Mechanism (CBAM) prove ineffective, Germany will maintain free emissions allowances for exporters to prevent carbon leakage.
Germany also commits to active participation in IPCEI schemes for hydrogen, batteries and microelectronics. The coalition will continue funding industrial decarbonisation through climate protection contracts (Klimaschutzverträge), tying state support to location commitments.
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