T@W Sustainable Energy Technology at Work - Home Page

EU ETS Country Profile - Germany
Updated 27 February 2008

This page is also available as a PDF file: Germany (176 Kb PDF)

General Overview
The German National Climate Protection Programme

The purpose of the present German National Climate Protection Programme is to make sure that Germany will be able to comply with the commitments made at the European and international level to reduce its greenhouse gas emissions in the period 2008 - 2012 by 21 percent as against 1990 levels and thus provide a basis for further ambitious environmental policies after 2012.

The sectors energy and industry are covered by the new instrument “emissions trading”. Therefore the Climate Protection Programme focuses on action deemed necessary in the transport and private household sectors from the present perspective.

Table 1: Development of Total CO2 emissions for different sectors in Germany (in Mio. tonnes CO2)
CO2–Emissions (in Germany )
Private Households
Small Trade / Business / Services
Total Emissions
* Differences in sums are due to rounded figures.
Source: National Inventory Report 2005, DIW Weekly Report No. 9/2005

All in all greenhouse gas emissions were brought down by as much as 18.5 per cent by the year 2003 as against 1990 levels. However, reduction rates have drastically slowed down since the mid 90s. Worth noting is in particular the turnabout which took place in the traffic sector. Here emissions were brought down by 15 million tonnes between 1999 and 2003 in Germany, which contradicts the development within the European Union. The instruments by which this was achieved are amongst others the ecological tax reform and the strengthening of the public transport system (e. g. Law on the Regionalisation of Public Transport).

Table 2: Baseline Situation for Compliance with Kyoto Targets - Development of greenhouse gas emissions and required action
GHG sector (in million tonnes)
target 2008/12
calculated gap 2003 - 2008/2012
forecast gap to 2008/2012 targets (required action)
CO2 equivalents
- 31
16 to 18
Other GHG
- 10
- 21
16 to 18
Private Households
8 to 10
Private Households + Transport
+ 2
16 to 18
- 2
Energy + Industry
- 21
0 (covered by emissions trading)

The targets for the 2008-2012 period are laid down in the Emissions Trading Allocations Act (ZuG 2007) and are thus legally binding. The new instrument emissions trading guarantees that the targets in the energy and industry sectors will be met. For the sectors private households and transport a joint reduction objective was set at 291 million tonnes per year. The Federal Ministry of Transport, Building and Housing was entrusted with dividing this figure between the two sectors and placed the rates at 120 million tonnes reduction per year for private households and 171 million tonnes per year for the transport sector. As for the other greenhouse gas emissions and the trade/business/service sector it is assumed that the 2008-2012 targets will basically be met without further intervention. Based on present forecasts it can also be assumed on the other hand that CO2 emissions are likely to rise again in the sectors private households and transport if no additional measures are taken.

The Federal Ministry of Transport, Building and Housing (BMVBW) developed sets of measures for the sectors private households and transport and expects that they are sufficient to reach the joint reduction target of 291 million tonnes CO2 per year for the 2008-2012 period as set out in the Emissions Trading Allocations Act. The following is a summary of the measures planned for these two priority areas.

Table 3: Measures in the sector private households to meet the emissions reduction target of 120 million tonnes CO2 in the 2008 - 2012 period (in million tonnes CO2)
CO2 Reduction Potential
Public Relations Campaigns, Counselling, Innovation
• upgrading of dena (Deutsche Energie-Agentur, German Energy Agency) as centre of expertise for energy efficiency
• large scale public relations campaigns
• training courses and quality improvement initiatives (investors, trade, planners, constructors)
• increased research under the auspices of the Building and Transport Ministry for innovations to increase energy efficiency; improved building materials
• further development of the energy savings contracting system on the heating market
Financial Support Measures
• KfW bank loans for the building sector
• Programmes to set market incentives in the biomass sector
• Programmes to set market incentives in the solar energy sector
• on-the-spot counselling
• Upgrading of cities and towns in Eastern Germany , council housing
Regulatory Measures
• implementation of the Energy Savings Ordinance (EnEV) 2006 and introduction of energy passes  
• amendment of the Home Ownership Act (Wohneigentumsgesetz)  
Autonomous Reduction Effects*
Total of Quantifiable Measures
* The estimate of the autonomous reduction effects is based on energy prices of 29$ per barrel crude oil for the reference year 2000. The further development was calculated on the basis of a long-term mean real increase of 1.5% per year which amounts to a price of 45$ per barrel for the year 2030. The expected effects would change in relation to changes in energy prices.
Source: Forschungszentrum Jülich (Hrsg.) (2005): Evaluierung der Minderungsmaßnahmen im Gebäudebereich (Research Centre Jülich; Evaluation of CO2 in the building sector).

Table 4: Measures in the transport sector to meet the emissions reduction target of 171 million tonnes CO2 in the 2008 to 2012 period (in million tonnes CO2)
CO2 Reduction Potential
Incentives to Reduce Transport Intensities and Increase Energy Efficiency in the Transport Sector
revenue -neutral tax reductions for low fuel consumption passenger cars taking into account activities of the EU Commission serving the same purpose
introduction of emissions-related landing fees at German airports
Technical Improvements in Vehicles and Fuels and Support for Alternative Fuels und Innovative Engines
Fuel Strategy of the Federal Government: substitution of traditional fuels by bio fuels
Substitution of F-gases in mobile air conditioning systems in accordance with the planned EU Directive on Air Conditioning in Vehicles
0.5 - 1
Public Information Campaigns on Low Emission Driving Habits
stepping up the campaign “ New Ways of Driving” (e. g. dena-campaign “efficient and on the move”)
Total of Quantifiable Measures

In addition to the measures accounted for by quantifiable effects, decisions were taken on a whole range of additional measures in the transport sector which undoubtedly will bring about a tangible reduction in greenhouse gas emissions but the reduction effect of which cannot be reliably calculated at the moment:

  • Upgrading of the toll system to set up a real “road pricing system “ on the basis of different local and time-related toll rates
  • Support given to international measures to promote energy efficiency in aviation
  • Measures to eliminate distortions of competitive positions between different means of transport
  • Refinement of the promise made by the car industry to reduce specific CO2 emissions in new vehicles
  • Introduction of new engine types and measures to increase engine efficiency
  • Stepped-up fitting of fuel consumption indicators in new vehicles

Even on the basis of conservative estimates it can be assumed that the sum of these measures will be sufficient to meet the climate protection targets in the period 2008-2012.

Monitoring of Climate Protection Programme efficiency

To permit an ongoing evaluation as to whether the measures laid down in the National Climate Protection Programme 2005 produce the projected emissions reductions, the programme provides for a regular monitoring. Under the monitoring provisions the Inter-Ministerial Working Group on CO2 - Reductions (Interministerielle Arbeitsgruppe (IMA) "CO2-Reduktion") will - based on already existing reporting obligations - submit an annual assessment report to the cabinet on the national greenhouse gas emission status with special emphasis placed on meeting climate protection targets. The next update of the National Climate Protection Programme will be published in 2008.

Medium- and long-term perspectives in Climate Protection

The current Climate Protection Programme (of 2005) is not limited to fulfilling the German obligations under the Kyoto Protocol. It is also geared to meeting the medium-term target of a 40 per cent reduction by 2020 as against 1990 levels, provided the rest of the EU Member States achieve a 30 per cent reduction in the same period.

Furthermore, the Programme is committed to the decision made by the European Council (Environment) according to which industrialised countries are to bring down their greenhouse gas emission by 15 to 30 per cent by the year 2020 and by 60 to 80 per cent by 2050 as against the baseline levels of 1990. It professes the commitment not to let global warming rise by more than 2 degrees Celsius compared to pre-industrial times.

The present Climate Protection Programme reiterates the commitment made by the Federal Government to take the necessary measures that will allow Germany to meet its Kyoto targets. It states ambitious medium- and long-term climate protection goals and thus lays the basis for challenging climate protection policies after 2012.

The German energy system – contribution of renewable (sustainable) energies

The future German energy strategy is formulated around four central pillars, namely security of supply, economic viability, competitiveness and environmental compatibility. According to latest investigations German companies intend to invest a total of 70 billion euros in the energy supply sector by 2012. Some 40 billion euros will be spent on renewable energies, 30 billion euros on new power plants and grids. In addition to this, the federal government will also be supporting energy research with two billion euros. Moreover, despite differences of opinion among the coalition partners, the phasing out of nuclear energy will be continued during the current legislative term until 2009 as laid down in the coalition agreement.

Renewable energies are one of the most important components of the new energy strategy. They represent the key to greater independence from fossil fuels. Biomass, wind power, solar energy and fuel cells will be the energy sources of the future. Currently, however, oil and gas are still dominant.

Figure 1: Structure of primary energy consumption in Germany, 2005

Sources: according to Working Group Energy Balances (AGEB) and the working group on renewable energies statistics (AGEE-Stat) ; according to physical energy content method; provisio nal figures; status February 2006


Table 5: Development of the share of renewable energy sources in energy supply, Germany 1998-2005
Final energy consumption %
Electricity generation (in relation to total gross electricity consumption)
Heat supply (in relation to total heat supply)
Fuel consumption (in relation to total road traffic)
Share of renewable energies in Germany's total final energy consumption
Primary energy consumption (PEC) %
Electricity generation (in relation to total primary energy consumption)
Heat supply (in relation to total primary energy consumption)
Fuel consumption (in relation to total primary energy consumption)
Total PEC
Share in PEC according to physical energy content method
* provisional figures, partly estimated, status February 2006
from 2003 new assessment of heat supply from renewables due to improved data availability (survey pursuant to Energiestatistik-Gesetz (EnStatG/act on energy statistics)
Sources: according to working group on renewable energies statistics (AGEE-Stat) using figures from Working Group Energy Balances (AGEB); Centre for Solar Energy and Hydrogen Research (ZSW); Federal Statistical Office (StBA); Institute for Energy and Environment (IE); German Solar Industry Association (BSi); German Electricity Association (VDEW); Association of German network operators (VND)

The use of renewable energies in Germany showed a positive trend in 2005. According to the working group Erneuerbare Energien-Statistik (AGEE-Stat/ working group on renewable energies statistics) the share of renewables in primary energy consumption increased from app. 4.0 % in 2004 to app. 4.6 % in 2005. The share in gross electricity consumption rose from app. 9.4 % in 2004 to app. 10.2 % in 2005, the contribution to fuel supply from 1.9 % to app. 3.4 %. On the heat market renewable energy sources accounted for app. 5.4 % compared to 5.2 % in the year before. Their share in the overall final energy supply (electricity, heat, fuels) went up to 6.4 % (2004: 5.7 %). Thus Germany is well within schedule to meet the renewables expansion targets for 2010 agreed at European level.

Of all renewable energies, wind energy made the largest contribution to electricity generation with 26.5 billion kWh (25.5 billion kWh in 2004) despite unfavourable wind conditions. This corresponds to a share of app. 4.3 % in Germany's total gross energy consumption. Although the newly installed capacity of app. 1,800 MW did not quite meet the development of the previous year (app. 2,000 MW), this result still exceeded expectations. For the next years the sector assumes that the number of new onshore plants will continue to decline as the number of available sites are decreasing and the replacement and modernisation of old plants (repowering) is picking up only slowly.

At 21.5 billion kWh electricity generation from hydropower remained basically stable in 2005 (2004: 21 billion kWh). The planning triggered by the amendment to the Renewable Energy Sources Act (EEG) in 2004 which also included a number of larger building projects, will only have an effect over the coming years due to lengthy lead times.

With a contribution to electricity generation of app. 10 billion kWh, the use of biomass (excluding landfill gas and sewage gas) had a share of app. 1.6 % in the gross energy consumption in Germany in 2005 (2004: 7.4 billion kWh). Especially the electricity generation from biogas increased strongly and more than doubled from 1.4 billion tonnes kWh during the previous year to 3.2 billion tonnes kWh because of the new provisions of the EEG.

As in the year before, the photovoltaics sector recorded a notable growth. In 2005 an estimated capacity of 600 MWp was taken into operation. Including these latest additions, photovoltaic installations adding up to more than 1,400 MWp are connected to the grid in Germany and generated app. 1 billion kWh of electricity in 2005.

The market for thermal solar collectors maintained its momentum in 2005. The Federal Government's market incentive programme has been and continues to be the decisive factor of this development. According to the Bundesverband Solarwirtschaft the newly installed collector area added up to app. 950,000 m2 (2004: app. 750,000 m2). Thus, by the end of 2005 a total collector area of 7.2 million m2 was installed in Germany.

Due to the high prices for fossil fuels on the heat market, the demand for wood as an energy source continued to increase. There have also been positive developments in the sector of modern wood-fired heating systems. The sale of wood pellets probably doubled compared to the year before. A notable growth was also recorded for biofuels. Sales went up from 1.1 million tonnes in 2004 to a good 2 million tonnes in 2005. The decisive factors for this increase were the taking into operation of new capacities, the continuous increase in the prices for diesel fuel and petrol and the effect of the act on the petroleum tax according to which the admixtures of biofuels to diesel fuel and petrol have been proportionately exempted from tax since early 2004.

Apart from the sale of biodiesel which still dominates (2005: 1.7 million tonnes), last year showed a noteworthy sale of bioethanol (0.2 million tonnes) and vegetable oil (0.15 million tonnes) for the first time. Progress is also being made in the sector of geothermal energy. About 17,600 heat pumps were sold on the heat market in 2005, an increase of app. 35 %. Only the power plant in Neustadt-Glewe made use of geothermal energy for electricity generation in 2005. However, other projects are being planned or under construction, e.g. the power plant in Unterhaching near Munich.

Table 6: Contribution of renewable energy sources to energy supply, 2005
Share of renewable energy sources [%]
in total primary energy consumption (calculated according to physical energy content method¹) 4.6
in total energy supply² 10.2
in total heat supply³ 5.4
in total road traffic 3.4
CO2 reduction through the use of renewable energy sources [mill. t CO2]
all renewable energy sources 83
Final energy supply from renewable energy sources 2006 [TWh]
Wind energy 26.5
Hydropower 21.5
Photovoltaics 1
Biomass (incl biogas) 10.1
Landfill and sewage gas 3.1
Geothermal energy
Total electricity 62.1
Biomass (total) 76.5
Solar thermal energy 3
Geothermal energy 1.6
Total heat 81.1
Provisional figures, partly estimated, status February 2006
¹ Calculation according to substitution method: approx 6.6%
² Share of total energy consumption  
³ Share of final energy consumption for heat  
Sources: according to working group on renewable energies statistics (AGEE-Stat); Centre for Solar Energy and Hydrogen Research (ZSW); Working Group on Energy Balances (AGEB); Federal Statistical Office (StBA); German solar industry association (BSW); ISET Kassel; Institute for Energy and Environment (IIE); German Electricity Association (VDEW)

Further information on the development of renewable energy sources is available at www.erneuerbare-energien.de.

Legal Framework Related to Climate Change
The German approach to stimulating SET

In general, since its start, the German approach to promoting SET has been based on four main instruments:

  • (direct) investment subsidies;
  • soft loans;
  • tax allowances; and
  • subsidies for the operational costs/feed-in tariffs.

These instruments are partly applied in combination. More specifically the following energy tasks were formulated by the German Federal Government (among others):

  • redesign of the energy law to create and secure fair market opportunities for SET;
  • removal of obstacles which hamper increased use of SET;
  • increased support for the production and launch of primary materials for SET;
  • realisation of a 100,000 Roofs Programme for photovoltaic systems (100.000-Dächer-Programm, HTDP); and
  • consensus with the energy industry concerning the phase-out of nuclear energy.
The 100,000 Roofs Programme (HDTP)

The first SET promotion measure introduced after the change of government in 1998 was the HTDP. It came into force in January 1999. Ist ambitious goal was to realise the installation of 100,000 new photovoltaic plants with a capacity of 3 kWp each. The encouragement to RES projects was given in the form of long-term soft loans (maximum amount: 500,000 euro per system) with very low and fixed interest rates (2003: 1.91 % per year effectively) for a term of 20 years. It was also possible to combine the HTDP with other public promotion programmes. After a low demand for PV in the beginning, application increased abruptly with the coming into force of the EEG (Erneuerbare-Energien-Gesetz) in April 2000, because the new feed-in law (see below) increased the remuneration for PV electricity from 8.2 to 50.62 euro ct/kWh. The programme was such a success that the target of 300 MWp newly installed PV capacity was reached much earlier than expected. Consequently, at the end of June 2003 the Credit Bank for Reconstruction (Kreditanstalt für Wiederaufbau, KfW) announced that it had stopped granting applications because the 300 MWp target had been attained.

The Ecological Tax Reform (ETR)

Another important step towards achieving a more sustainable energy system in Germany was the introduction of an Ecological Tax Reform (ETR) which came into force on April 1, 1999 . The central steps of this first phase of the ETR were the increase in the taxes on motor fuels (3.07 euro ct/l), fuel oil (2.05 euro ct/l) and natural gas (0.164 euro ct/kWh) as well as the introduction of an electricity tax (1.02 euro ct/kWh), although the energy-intensive industry and public transport only had to pay a reduced tax of 20 % and 50 % respectively of the normal ETR tax level. With the Law on the Continuation of the ETR of December 16, 1999 , the tax on motor fuels was further increased by 3.07 euro ct/l and the electricity tax by 0.26 euro ct/kWh every 1 st January of the years 2000 to 2003. With the Law on the Further Development of the ETR of December 23, 2002 , the taxes on fuels for heating purposes were also increased. Tax allowance for natural gas as fuel was extended until 2020 and the ETR tax rate for energy intensive industries was raised from 20 to 60 % of the normal ETR tax level. If and how the ETR will be further developed beyond the regulations in force was a point of discussion by the government parties in 2004. There are different ecological effects of the ETR for SET. On the one hand, biofuels profit from the ETR, because they are exempted from taxation. On the other hand, RES power is not exempted from the electricity tax, with the exception of customer generation by RES. This non-exemption is justified by the federal government by the problem of tracing back the exact production process of the electricity (and the danger of a false labelling and tax fraud as a consequence). In compensation, the federal government has earmarked parts of the ETR revenues for another main RES promotion measure: the Market Incentive Programme for an increased use of RES (Marktanreizprogramm, MAP). Approximately 0.65 billion euro of the overall ETR revenues of some 57.7 billion euro in the years 1999-2003 were earmarked for the MAP.

The Market Incentive Programme (MAP)

In September 1999 the German government introduced their programme “Richtlinien zur Förderung von Maßnahmen zur Nutzung erneuerbarer Energien”, short “Marktanreizprogramm” to support the market penetration of sustainable energy systems in Germany . In general, the MAP is currently one of the most important RES support programmes, especially for heat-producing renewable energy technologies, particularly because combination with other promotion programmes is partly possible. With the MAP, financial support is made available for solar thermal systems, installations for the combustion of solid biomass, biogas, small hydro power and geothermal plants as well as for photovoltaic installations at schools (Photovoltaic systems on schools get 3,000 euro if the power output is higher than 1 kWp). Those entitled to apply for the MAP are similar to those in the case of HTDP: private persons, associations, foundations, housing associations, freelancers, SMEs as well as farmers and foresters. Support is available through direct investment subsidies and soft loans, the latter up to 100 % of the investment costs (maximum 5 million euro). Whereas the former is essentially given for the realisation of small plants, the latter is the normal form of support for projects with high investment costs. Moreover, some RES get partial forgiveness of debt of the soft loans. Expiry of the MAP was originally planned for the end of 2003, but on September 18, 2003 the BMU announced an extension of the MAP until the end of 2006 with new promotion provisions starting in 2004. Apart from private users, from 2004 on communities, municipal institutions and churches can also make use of the MAP.

The Environment and Energy Conservation Programme (EECP) and the Environment Programme (EP)

Other important German SET promotion programmes are the Environment and Energy Conservation Programme (EECP) and the Environment Programme (EP) by the KfW. Those targeted are above all SMEs, freelancers, local/municipal companies and public-private partnerships. Normally, financial support is given in form of soft loans up to 50 % of investment costs. If the two programmes are combined, 75 % can be covered and in the case of SMEs even the full investment sum. The maximum support amounts to 0.5 million euro (western states) and 1 million euro (eastern states) in the case of the EECP and 5 million euro in the case of the EP. These two programmes and their combination are of crucial importance, especially for the development of wind energy in Germany , because wind power is not supported by the MAP. Between 1990 and 2002, the soft loans granted by the two programmes reached a total of nearly 10 billion euro, of which some 95 % concerned wind projects.

The Renewable Energy Sources Act (EEG)

The most important German SET promotion measure in the area of electricity is without any doubt the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG), which came into force on April 1st, 2000, continuing the approach of ist predecessor, the StrEG of 1991, in an extended and in many respects improved manner. The design of the former StrEG included several points that harmed the development of RES and made necessary a determined and quick change. The aim of the EEG is to contribute to the goal of the EU and Germany to at least double the share of RES in electricity generation in the year 2010 compared with the 1997 level, which represents a minimum of 12.5% in the case of Germany . The most important structural elements of the EEG can be summarised as follows. Firstly, the remuneration system was uncoupled from the average utility revenue per kWh sold and replaced by fixed, regressive and temporarily limited feed-in tariffs for the whole amount of RES electricity generated. Secondly, a priority purchase obligation for RES power was introduced, to be met by the nearest grid operator. Thirdly, a Germany-wide equalisation scheme was adopted for the costs that grid operators incur as a result of the different amounts of RES each region feeds into the power grid, which leads to an even distribution of the RES power amounts and extends remuneration to all energy supply companies and ultimately to all end-consumers. Fourth, the EEG also contained for the first time provisions concerning the financing of grid connection and grid extension.

The most obvious changes in comparison to the StrEG are related to the remuneration scheme. With the coming into force of the EEG, all remuneration rates were raised, although on different scales, depending on the source of energy, capacity or location of the plant. All remuneration rates can be found in the table below. Except for hydro power, where the amortisation of the power plants normally takes several decades, the EEG fixed the purchase guarantee and the feed-in tariffs for 20 years after commencement of operations of any new plant. To stimulate innovations and to ensure a better compatibility with the European law on state aid, the remuneration paid under the EEG also includes a regressive element: from 2002 on, new installations of biomass (- 1 %), wind (-1.5 %) and PV (-5 %) receive lower tariffs. From 2003 on, new installations of these types receive tariffs lowered by a further 1, 1.5 or 5%, and so on for the following years.

The EEG comprises for the first time a clear regulation concerning grid costs. Accordingly, the costs for grid connection have to be paid by the plant operators whereas possible costs for upgrading the grid must be borne by the grid operator. For the settlement of any dispute in relation to grid costs, the Federal Ministry of Economics and Technology (BMWi) also established a clearing centre, with the involvement of the parties concerned.

Table 7: Feed-in rates under the Renewable Energy Sources Act of 2004
Rate in cent*
Duration of support Comments
Methane from landfill, coal mines, sewage stat 20 years
Annual decline²: 1.5 percent
Bonus of 2 cents if the gas is brought to natural gas quality or if gained with certain innovative technologies
up to 500kW
up to 5MW
above 5 MW
Hydro 15-30 years¹ (the longer period is for installations below 5MW)
Annual decline³: 1 percent, beginning in 2005
In many cases only the additional capacity resulting from moderni-sation of the installation receives the special rate
up to 500kW
7.67 / 9.67
up to 5/10MW
up to 20MW
up to 50MW
up to 150MW
Biomass 20 years¹
Annual decline²: 1.5 percent, beginning in 2005
There is a system of bonuses (for innovative solutions, for CHP etc.) which can raise the rate up to 21.5 cents
up to 150kW
up to 500kW
up to 5MW
Above 5MW
Recycled timber (categ. A III/IV)
Geothermal 20 years
Annual decline²: 1 percent, beginning in 2010
up to 5MW
up to 10MW
up to 20MW
above 20MW
Wind power 20 years
Annual decline²: 2 percent, beginning in 2005 for onshore and 2008 for off-shore
On-shore: Turbines with a yield of less than 60 percent of reference turbine are not eligible for tariff Off-shore: Turbines located in nature or landscape or bird protec-tion areas are not eligible
On-shore: initial rate (at least five years)³
definitive rate
Off-shore: initial rate (12 years or longer4) Definitive rate
9.10 6.19
Solar radiation 20 years
Annual decline²: 5 percent, beginning in 2005. For non-built up areas, the decline increases to 6.5 percent beginning in 2006
up to 30kW
up to 100kW
Façade bonus (cladding)
Non-built up area
Source: Non-official version of the Act before promulgation, from Non-official version of the Act before promulgation, accessed 3 August 2004
* Rates are minimum rates except when marked by asterisk
1. Time period for which an eligible installation receives the special rate.
2. Installations connected in subsequent years will receive a rate (for 15-30 years) which is determined by the year of installation and which declines every year for that year’s new installations.
3. The five years apply to facilities achieving 150 percent of the reference installation (roughly equals a turbine with an average wind speed of 5.5m/sec). For other facilities the higher rate is extended for two months for every 0.85 percent that the facility remains below the 150 percent of the reference facility. For re-powering projects, the duration of the special rate is longer.
4. Longer if distance from the shore exceeds 12 nautical miles or if water depths are at least 20 metres or more.

Other SET promotion measures

Besides financial measures for promotion of SET, on federal level there have been decisions on SET information dissemination and on improving the general environment for a sustained diffusion of SET in the middle and long term. Concerning the former, an important step taken by the red-green German government was setting up a German Energy Agency (Deutsche Energie-Agentur, Dena) in September 2000. With Dena, the federal government established a competence centre on rational use of energy in the building sector, as well as in the electricity sector, RES, climate protection and sustainable development and international co-operation.

The main initiative in the international area is the ‘‘RES Export Initiative’’ (‘‘Exportinitiative Erneuerbare Energien’’), founded in summer 2002 to develop a consistent strategy for the international diffusion of German RES technology.

The German National Allocation Plan (NAP)
The structure of the NAP

The National Allocation Plan consists of:

  • a Macroplan which defines the national emissions budget and determines the total quantity of allowances to be allocated and
  • a Microplan for the intended allocation of allowances to operators of individual installations; the Microplan also sets out the volume of emission allowances to be set aside for the new entrant reserve.

The Macroplan must be consistent with national climate protection targets and the climate protection programme. The overall budget of greenhouse gas (GG) emissions available to Germany in Kyoto period 2008–2012 is derived from the terms of the Kyoto Protocol and of the burden sharing agreement in the European Union. These state that in the period 2008–2012 GG emissions must be reduced by 21% compared to 1990 levels. The GG budget for the period 2005–2007 must be consistent with this target. The Macroplan substantiates these requirements in concrete form, breaking the GG budget down by greenhouse gas and sector.

The national GG emissions budget covers all six gases named in the Kyoto Protocol, whereas emissions trading in the first period 2005–2007 are confined to CO2. The Macroplan therefore has to provide forlikely changes in emissions of the other gases in response to agreed or planned measures. A budget for CO2 emissions in 2005–2007 has been derived accordingly.

The installations covered by emissions trading account for by far the greater part of the energy and industrial sectors. Trading will not, however, (apart from a few exceptions) include emissions generated by private households, the transport sector or commercial activities (“Gewerbe”). To ensure overall compliance with the national CO2 budget, the Allocation Plan also establishes a total budget for these sectors and describes the measures adopted to achieve these targets. The Macroplan also stipulates what proportion of the total quantity of emission allowances will be allocated and what proportion will be set aside for the new entrant reserve.

The Microplan defines the methods, rules and criteria which determine allocation decisions and the question of what quantity of allowances will be granted to the various installations on the basis of the available data. The principles applied include grandfathering (allocation based on an installation’s historical emissions in a reference period) and benchmarking (allocation based on the average specific emissions of a product category). The data to which this methodology for calculating allowances for individual installations were applied in Germany derives from the period 2000–2002, following a government decision on 28 May 2003.

The Microplan was founded on the actual emissions from installations subject to emissions trading during the reference period 2000–2002. Quantities had to be consistent with the Macroplan to ensure that the overall quantity of allowances actually allocated does not exceed or fall short of the quantity envisaged in the Macroplan.

The origin in both cases are the CO2 emissions from installations subject to emissions trading during the reference period 2000–2002:
  • The Macroplan indicates total CO2 emissions from all installations subject to emissions trading in the reference period 2000–2002. To determine the budget, i.e. the total quantity of allowances which can now be either allocated or set aside for the new entrant reserve, this total is multiplied by the ratio between:
    - the annual emissions budget set for the energy and industry sectors for the period 2005–2007 and
    - emissions from the energy and industry sectors in the reference period 2000-2002.
  • In the Microplan the allocation to an individual installation is calculated using:
    - CO2 emissions from the individual installations in the reference period 2000-2002 and
    - the compliance factor.
  • In determining the compliance factor, the following are taken into account:
    - the ratio between the CO2 emissions budget for the energy and industry sectors in the period 2005-2007 and actual emissions in the reference period 2000-2002, and
    - allowances earmarked for the new entrant reserve and the sum total of all special allocations (e.g. early action).
Table 8: Classes of installation subject to emissions trading
Energy Generation and Conversion
I Installations for generating power, steam, hot water, process heat or hot waste gas using fuels in a combustion facility (e.g. power station, heat & power station, heat-only station, gas turbine station, combustion engine installation, other firing installation), including associated steam boiler, with a rated thermal input of 50 MW or more
II Installations for generating power, steam, hot water, process heat or hot waste gas using coal, coke, including petroleum coke, coal briquettes, peat briquettes, peat fuel, untreated wood, emulsified natural bitumen, fuel oil, gaseous fuels (notably coke oven gas, mine gas, steel gas, refinery gas, synthesis gas, petroleum gas from tertiary extraction of petroleum, sewage gas, biogas), methanol, ethanol, untreated vegetable oils, vegetable oil methyl esters, untreated natural gas, liquefied gas, gases from public gas utilities or hydrogen with a rated thermal input of more than 20 MW and less than 50 MW in a combustion facility (e.g. power station, heat & power station, heat-only station, gas turbine station, combustion engine installation, other firing installation), including associated steam boiler, except for combustion engine facilities for drilling rigs and emergency power generators
III Installations for generating power, steam, hot water, process heat or hot waste gas using solid or liquid fuels other than those listed under No. II in a combustion facility (e.g. power station, heat & power station, heat-only station, gas turbine station, combustion engine installation, other firing installation), including associated steam boiler, with a rated thermal input of more than 20 MW and less than 50 MW
IV Combustion engine facilities to power working machinery using fuel oil EL, diesel fuel, methanol, ethanol, untreated vegetable oils, vegetable oil methyl esters or gaseous fuels (notably coke oven gas, mine gas, steel gas, refinery gas, synthesis gas, petroleum gas from tertiary extraction of petroleum, sewage gas, biogas, untreated natural gas, liquefied gas, gases from public gas utilities, hydrogen) with a rated thermal input of more than 20 MW, except for combustion engine installations for drilling rigs with a rated thermal input of more than 20 MW and less than 50 MW
V Gas turbine facilities to power working machinery using fuel oil EL, diesel fuel, methanol, ethanol, untreated vegetable oils, vegetable oil methyl esters or gaseous fuels (notably coke oven gas, mine gas, steel gas, refinery gas, synthesis gas, petroleum gas from tertiary extraction of petroleum, sewage gas, biogas, untreated natural gas, liquefied gas, gases from public gas utilities, hydrogen) with a rated thermal input of more than 20 MW, except for closed-cycle installations with a rated thermal input of more than 20 MW and less than 50 MW
VI Installations for the distillation or refinement or other downstream processing of petroleum or petroleum products in mineral oil or lubricant refineries
VII Installations for the dry distillation of black coal or lignite (coke ovens)
Production and Processing of Ferrous Metals
VIII Installations for the roasting, smelting or sintering of iron ores
IX Installations for the production or smelting of pig iron or steel including continuous casting, including with the use of concentrates or secondary raw material s, with a smelting capacity of 2.5 tonnes/hour or more, including operation in integrated smelting plants
Mineral Industry
X Installations for the production of cement clinkers with an output of more than 500 tonnes/day in rotary kilns or more than 50 tonnes/day in other kilns
XI Installations for the calcination of limestone or dolomite with an output of more than 50 tonnes/day quicklime or unslaked dolomite
XII Installations for the production of glass, also from recycled glass, including installations for the production of glass fibre, with a melting output of more than 20 tonnes/day
XIII Installations for the baking of ceramic products where kiln capacity is at least 4 m³ and setting density per kiln at least 300 kg/m³
Other Industrial Activities
XIV Installations for the production of pulp from timber, straw or similar fibrous materials
XV Installations for the production of paper and board with an output of more than 20 tonnes/day
Source: National Allocation Plan for theFederal Republic of Germany (2005 – 2007), Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin, 31 March 2004

Allocation quantities

Almost a quarter of the allowances of the EU ETS were allocated in Germany. 495 million t CO2/a were allocated to 1,849 plants in 2005-2007. The energy sector is the most important player with 67 % of the plants and 79 % of the assigned allowances (Source: DEHSt). Figure 2 shows the allocation of the different sectors in Germany .

Figure 2: Number of plants and allowances in the EU ETS in Germany

Source: DEHSt

Allocation principles

The German NAP was implemented via the “Zuteilungsgesetz” (allocation law, German abbr.: ZuG 2007). There exist two main methods used in the ZuG: Grandfathering and Benchmarking.


Principally, the base period for the Grandfathering was constituted by the years 2000 through 2002. For facilities commissioned between 1 January 2000 and 31 December 2004 , later base periods could have been adopted (ZuG 2007, § 7). The fulfilment factor originally was 0.9709, which means that the operators should get certificates for 97.09 % of the emissions they had in the base period (ZuG 2007, § 5). Due to the high use of the “option rule”, the fulfilment factor was put down, so the energy dependent emissions (resulting from combustion processes) should be reduced by about up to 7.5 %. There is little that can be done to reduce process dependent emissions (resulting from chemical reactions), so these were given a fulfilment factor of 1 (ZuG 2007, § 13), which means that they need not to be reduced (71 million allowances/a were allocated for process dependent emissions, Source: DEHSt). The allocation law rules that if a facility emits less than 60 % per year than it emitted in average in its base period, the operator has to give back certificates according to its actual emissions (e.g. if the emissions of a facility in 2006 are only 45 % of the emissions of the average year in the base period, the operator has to give back 55 % of the certificates allocated for the facility, ZuG 2007, § 7). If the facility is shut down, there will be no more certificates allocated in the subsequent years. The “60 % rule” wasn’t accepted by the European Commission. As the European Court of First Instance held its first hearing on 21 June 2006 , a decision on that issue is still pending.


New entrants commissioned after 1 January 2005 (that don’t replace old ones) will be provided with certificates by way of benchmarks (e.g. from 0.365 t CO2/MWh for gas fired power plants to 0.75 t CO2/MWh for coal fired power plants, ZuG 2007, § 11). There is a new entrants reserve of 9 million t CO2 for 2005-2007 (ZuG 2007, § 6). If that reserve isn’t enough to fulfil the demand of new entrants, state-owned “Kreditanstalt für Wiederaufbau” (Reconstruction Loan Corporation, German abbr.: KfW) will buy additional certificates in the market to assure that all new entrants get their certificates free of cost. In the application for the certificates, the operators have to estimate the production figures until 31 December 2007 of their facility. If this estimate turns out to be too high ex-post, the operators have to give back certificates according to their actual emissions (ZuG 2007, § 11). Like at the “60 % rule”, the European Commission didn’t accept this ex-post rule and a final decision is still pending. Facility operators were allowed to choose between an allocation according to the Grandfathering rule or a benchmarking system like for new entrants, the so called “option rule” (ZuG 2007, § 7). Although the option rule was implemented just to please the needs of one operator, many other operators chose to apply according to it. 14 % of the allowances of the energy sector (53.80 million allowances/a) and 20 % of the industry sector (21.06 million allowances/a) were allocated according to the option rule (Source: DEHSt).

Transfer rule

If a decommissioned facility is replaced by a new one, the operator may transfer the certificates to the new facility. This should be an incentive for the operators to replace old and inefficient facilities with new and more modern ones (ZuG 2007, § 10).

Early Action

Facilities commissioned between 1 January 1994 and 31 December 2002 , as well as modernized old facilities, are considered to be very efficient. A fulfilment factor of 1 is specified for such facilities on condition that modernized old facilities are able to reduce their specific emissions by a certain percentage in relation to a three-year reference period. This emission reduction rate increases successively up to 2002 (ZuG 2007, § 12). Especially operators in the Eastern part of Germany (notably Vattenfall Europe Generation with their new lignite power plants) benefited of the Early Action rule (93.00 million t CO2/a, 84 % of the budget for Early Action, Source: DEHSt ).

Nuclear phase out

In the regulations of the nuclear phase out it is written, that no operator should be discriminated due to the nuclear phase out. There was a total of 1.5 million t CO2/a allocated to the two operators EnBW and E.on due to the phase-out of the nuclear power plants Obrigheim and Stade. The reason is that they have to replace the phased out nuclear power plants by fossil fuel powered ones, for which they get a relatively low benchmark factor (e.g. compared to the allocation you could get under the transfer rule, ZuG 2007, § 15).

Undue hardship

There were also two regulations that operators could use if they would experience undue hardship under the other allocation rules (e.g. due to very low emissions during the base period). But the hurdles to get certificates via these regulations were very high (ZuG 2007, § 7).

Banking & Borrowing

There is no limit for banking of certificates within the period 2005-2007, but it is not allowed between the periods 2005-2007 and 2008-2012. Borrowing is possible from one year ahead within 2005-2007, but not between 2008 and 2007.

Priority areas

CHP generation plants got a bonus in the German NAP for 2005-2007 (totalling 2 million allowances/a, Source: DEHSt). But that wasn’t very high and couldn’t be combined with other priority rules. If CHP generation plants applied with estimated production figures and benchmark factors according to the “option rule”, they got allowances for both, heat and power production, which usually was a bigger advantage than the bonus (ZuG 2007, § 7). Plants using renewable energy weren’t regarded under the allocation law in Germany , they are prioritized by the “Erneuerbare-Energien-Gesetz” (Renewable Energy Sources Act, German abbr.: EEG). But some operators enforced using sludge and biogenous fuels in their fossil power plants, because their emissions factor is defined as 0 in the allocation law.

NAP 2008-2012

At the beginning of February 2007 the German Environment Minister Sigmar Gabriel said Germany will accept the second-phase cap set for its emissions trading sector by the European Commission on 29th November. This means Germany will allocate an annual average of 453.07 million allowances for the second phase of the EU emissions trading scheme.

Germany's initial proposal was to allocate 482 million allowances per year (NAP 2008-2012 from 30 June 2006), but it later reduced that figure to 465 million after revised emissions figures were made available.

The main facts and modifications of the revised NAP 2008-2012 from 13 February 2007 from the German Ministry of Environment are:

  • Allocation of 453.07 million allowances per year
  • Within this budget the reserve for new entrants is 23 million allowances per year
  • Stop of the transfer rule as incentive program by transferring the certificates from a decommissioned facility to the new facility
  • No ex-post corrections of allocation amounts
  • No extra allocation for nuclear phase out

On 22 June 2007 the new German Allocation Act 2012 (Zuteilungsgesetz - ZuG 2012) was decided by the German Bundestag. Thus the legal bases for the second period of trade with CO 2 emissions was laid. Compared to the first trading period, the reduction is over 11 percent. The following allocation rules were resolved:

Allocation rules for energy producers (activities I - V annex 1 TEHG)

  • Allocation for new entrants and existing installations for German energy producers on the basis of a benchmark system
  • Allocation rule for existing energy production installations (starting date of operation until 31.12.2002): calculation basis is the average of the production between 2000-2005 multiplied with a defined benchmark; CHP-Plants will receive an allocation for power production as well as for heat production. There is no differentiation made between coal and lignite regarding the benchmark.
    • Benchmark power production:
      • 0,365 t CO2/MWh if gas is used
      • 0,750 t CO2/MWh if coal is used
    • Benchmark heat production:
      • 0,225 t CO2/MWh if gas is used
      • 0,345 t CO2/MWh if coal is used
  • Allocation rule for newer existing (starting date of operation 2003-2007) and new energy production installation (starting date of operation from 2008): Calculation basis for the production is the standard load factor and the capacity of the plant; the benchmarks are the same for existing installations
  • no reduction factor for new installations; a reduction factor for the energy sector will be set if there is an over-allocation

Allocation rules for industry sector (activities VI - XVIII annex 1 TEHG)

  • Allocation rule is Grandfathering only with an extended base period from 2000-2005
  • Allocation for new installations (starting date of operation from 2008): Calculation basis for the production is the standard load factor and the capacity of the plant multiplied with a defined benchmark for each industry sector
  • fixed reduction factor of 1,25% for existing installations and no reduction factor for new installations in the industry sector

Special arrangements:

  • Granting benefits for smaller installations at all sectors (defined as installations with <25,000 t CO2 per year based on the average emissions of the base period 2000-2005): allocation rule is Grandfathering with an extended base period from 2000-2005 with no reduction factor
  • Use of JI/CDM certificates not exceeding 22% of the allocation amount per installation is allowed

Furthermore, the German Bundestag has decided that as of 2008, 40 million emissions allowances will be sold each year. From 2010 on this amount shall be auctioned. This rule is only applicable for power production installations.

Summarizing the Allocation Act 2012, it requires a lower reduction performance from the manufacturing industry than from the energy industry. Drawing this distinction between the sectors takes into account their different competitive circumstances and reduction potential. The consequence is that industry which competes internationally will have to meet a lower reduction.

The phase of application for allocation started on 19. August and ended on 19. November 2007.Until the end of February the DEHSt will finalize the allocation and send out the allocation decrees to the operators of the installations. First results show that a reduction factor for the energy sector have to be set to avoid an over-allocation.

ETS Companies
Key companies in the ETS in Germany

The German NAP was mainly negotiated between the Ministry of Environment and the Ministry of Economics, supported by consultants. There was also an extensive lobbying, especially from the associations of the energy and other industry sectors, but also from individual companies. Environmental groups also took part at the discussion, but they had little influence. The ETS in Germany is dominated by the energy sector. Among the top ten companies (regarding the number of allowances allocated) are seven from the energy, two from the steel and one from the refinery sector. In total they account for 56 % of the allowances allocated for NAPI in Germany (joint ventures not included).

Table 9: Key companies in the ETS in Germany
Company Sector Number of facilities Number of allowances allocated p.a. (in million t CO2)
RWE Power Aktiengesellschaft Energy 18 110.73
Vattenfall Europe Generation AG & Co. KG Energy 10 66.20
E.ON Kraftwerke GmbH Energy 32 34.63
ThyssenKrupp Stahl AG Steel 8 16.06
STEAG AG Energy 5 10.10
EnBW Kraftwerke AG Energy 10 10.08
Bewag AG & Co. KG Energy 18 8.56
Salzgitter Flachstahl GmbH Steel 3 7.38
Saar Energie AG Energy 21 7.35
Shell Deutschland Oil GmbH Refinery 7 6.98
Total Top 10   132 278.09
Top 10 (in % of total Germany )   7.14% 56.17%
Total Germany   1849 495.07

Source: DEHSt

Effect of the EU ETS on the different sectors

In general one can say that in Germany the facilities already work rather efficiently, so usually the best abatement measures are a fuel switch or the replacing of an old and inefficient facility through a new and efficient one. Many measures at combustion plants don’t only have an impact on the CO2 emissions but also on the effectiveness of the plant, which makes some of them profitable even without emissions trading. In these cases emissions trading was just the impulse that was needed to realise these efficiency measures.

Due to emissions trading there should be a trend towards gas fired power plants, but in Germany there wasn’t really a significant fuel switch yet. The price for CO2 certificates is too low to compensate the high gas price. In the power sector there are some internal abatement measures that improve the effectiveness of the power plants (e.g. better use of waste heat inside the power plant). There is also a trend (in the power sector and also in other industries) to an enforced use of sludge and biogenous fuels in fossil power plants, because their emissions factor is defined as 0 in the German allocation law as in the European Directive, Directive 2003/87/EC. To realise long-term abatement measures, the timeframe of the ETS is too short and it's too difficult to do a long-term planning.

Other industry sectors fear that they would loose customers, if they pass the (opportunity) costs of CO2 through to their customers. They usually have bilateral customer relationships and unlike the power companies they can’t trade their products in an anonymous market. Some sectors can’t even include the real costs in their product prices.

There are also little possibilities to lower the process dependent CO2 emissions that incur in some production processes. One possibility in the cement industry is e.g. to lower the share of clinker in the cement. But it has to be proved whether this would be accepted by the customers.

The players in the ETS are market driven. They usually only implement abatement measures if it is economically viable for them, may it be through lower cost or through a marketing campaign. That means that the low hanging fruits are often picked, but to realise long-term investments in low emission technologies the development of the emissions market after 2013 (and even until 2012) is too uncertain.

Interesting topics within the EU ETS for a sustainable development could be:

  • fuel switch towards biogenous fuels or renewable energy (it has to be proved whether it’s possible to use it as an abatement measure according to the EU ETS),
  • energy efficiency measures in the industry sectors (energy consulting for high and low emitters),
  • lobbying towards a NAP III that ensures a sustainable development (e.g. inclusion of other sectors like aviation and other gases like CH4 in the ETS).

Interesting topics outside the emissions trading market may be:

  • renewable energy sources,
  • energy efficiency in households,
  • biogenous fuels for transports.
Research and Development Priorities

Energy research must be seen within the wider context of the Federal Government’s overall energy policy goal of ensuring a viable and permanently subsidy-free energy supply.

Figure 3: R&D Budget for Renewables and Efficiency

Source: Hinrichs-Rahlen, 2005

Priorities in the energy research are:

  • Reduction of energy consumption
  • Increasing energy efficiency
  • Promotion of renewable energy sources

The "Investing in our Future" Programme, 2001 – 2003, intensified energy research in the areas of:

  • Fuel cells
  • Geothermal systems for heat and power generation
  • Offshore wind farms
  • Optimisation of energy efficiency of old buildings
  • Energy efficiency of innovative propulsion technologies

Coal and other fossil fuels:

  • Improved components and processes
  • Development and testing of new materials
  • Upgrading pressurised pulverised-coal combustion
  • Basic research to explore and test hot-gas-scrubbing processes
Links to Relevant and Related Websites
  • unfccc.int - United Nations Framework Convention on Climate Change
  • www.dehst.de - Federal Ministry of Environment, German Centre for Emissions Trading (Deutsche Emissionshandelsstelle)
  • www.bmu.de - Federal Ministry for the Environment, Nature Conservation and Nuclear Safety
  • www.erneuerbare-energien.de - Information on renewable energies in Germany
  • www.dena.de - German Energy Agency
  • National Allocation Plan for the Federal Republic of Germany (2005 – 2007), Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin, 31 March 2004
  • National Allocation Plan for the Federal Republic of Germany (2008-2012), Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin, 13 February 2007
  • Development of renewable energies in Germany in 2005 (Status: February 2006), BMU – Arbeitsgruppe Erneuerbare Energien, Statistik
  • M. Bechberger, D. Reiche, Renewable energy policy in Germany: pioneering and exemplary regulations, Environmental Policy Research Unit (FFU), Free University of Berlin, Germany
  • Rainer Hinrichs-Rahlwes, R&D in the Field of Renewable Energies in Germany, 2005, Renewable Energy for Europe – Research in Action
  • Allocation Act 2012 (Zuteilungsgesetz - ZuG 2012), 7 August 2007