Angela Merkel’s CDU (with their Bavarian sidekicks, the CSU) and the free-market FDP – the main winner of Germany’s federal elections – will form the next governing coalition. This is almost certainly bad news for German climate change policy – both domestically and on the international stage – but the policy setbacks in this area will arguably be more limited than what the FDP would prefer. Looking at international negotiations and energy policy as examples will show why.

1) International negotiations

Within the Grand Coalition that governed Germany for the past 4 years, Germany’s stance at international negotiations was never a hotly contested political terrain, for several reasons. Because Germany started important environmental measures earlier than other countries (and cleverly pushed for CO² emission-reduction targets to be based on 1990, before the heavily eastern German industry was mostly shut down) being progressive in contrast to international negotiating partners was never particularly hard, because it did not necessitate painful domestic policy measures. While this is changing to an extent, Germany, and indeed Europe, are not the crucial barriers to a post-Kyoto. And Angela Merkel, a former environment minister and early believer in the science behind climate change is unlikely to give up control over negotiations to an extent that would endanger a progressive German position.

Nevertheless, another danger is more real. Sigmar Gabriel (SPD), German’s environment minister had four years in which to build relationships with other negotiators and governments, get a feeling for the limits of other countries’ room for political maneouvre and learn the tricks of the trade. Given the lack of high-profile candidates in the area of environmental and climate change policy within the FDP and CDU/CSU, Gabriel successor will almost certainly struggle to make a similar impression. And, in addition, she or he will only have had three weeks at the most to get their head into an issue that is among the most complicated and tricky of any ever attempted to be dealt with by international negotiations.

2) Energy policy

While it is fair to say that climate change policy did not feature in the run-up to the federal elections at all, this is not true for energy policy. A long string of lies about nuclear energy was masterfully publicised by SPD environment minister Sigmar Gabriel. They included cover-ups about leaks in the site of Germany’s proposed site for the long-term storage of nuclear energy, high costs for cleaning up an alternative site borne by the tax-payer, the existance (and subsequent denial of this fact) of a strategy paper commissioned by an energy major and outlining communication strategies to promote nuclear energy in the election campaign (conclusion: keep quiet and point out nuclear energy’s green credentials). In addition to further accidents in a notorious north-German nuclear power plant and the emotive nature of many Germans’ thinking about nuclear energy made the CDU/CSUs and FDPs election pledge of ‘exiting-the-exit’ of nuclear energy (Ausstieg vom Ausstieg) one of the few clear dividing lines in an otherwise uneventful election campaign.

The high percentage of Germans who want to exit nuclear energy doesn’t seem to have helped the SPD very much. Nor is there a clear-cut impact of nuclear policy on climate change. Nuclear energy is clean (with regards to CO² emissions), and not extending the life of nuclear power plants would almost certainly have meant building more coal powered ones, even at the breakneck speed of German renewables growth. While there is a valid argument that being able to keep written-off nuclear plants running will decrease the pressure for large energy companies to invest in renewables, this would have been equally true for investment in coal that is already happening. If the new government sticks to the CDUs election pledges of not building new nuclear and taxing nuclear providers half the extra profits they make from extending their lifetime to invest this money in renewable energy, then this may not actually be bad news for preventing climate change. Yet this is doubtful. The traditional energy companies are not friends of renewables, and their deep pockets and lobbying prowess may mean they will push further, for government-subsidised new nuclear power stations and reductions in funding for renewables. If the market knows best, skepticism may prevail. On Monday morning after the election the shares of EON and RWE jumped, while those of renewable technology producers fell sharply…

In the uncertain time when noone is quite sure whether their governments, politicians and parties will be more or less Obama-esque in their approach to solving climate change in a severe economic downturn. So a look back at some of the past months’ highlights in German climate change policy over the past few months:

1) Poznan, 0,5/1: No comment about the overall progress of a post-kyoto agreement, but Germany was not notable for heroic leading from the front. A subdued performance.

2) EU Climate agreement: 1,5/3) Germany agreed to auction all permits for emissions from energy production, kudos. But on permits for energy-intensive industry politicians faltered to industry pressure, and the renegotiation and eventual relaxation of the timeline for reducing fleet emissions a clear sign that there are worries about the German car industry.

3) The fiscal stimulus package: 1/3) Closer at home, last month’s fiscal stimulus package disappointed those that had hoped for a green new deal. Among others, the Green party is dissatisfied with the environmental aspects of the package, and, because of Germany’s finely balanced political landscape is now in a position to block the package’s passage through parliament by virtue of membership in Hamburg’s unique black-green coalitio, and threatening to do so.

Their grievances centre on a new CO² based car tax regime, after a first draft would have halved tax for the most polluting SUVs. With last minute changes the new regime will not change existing rates much, with exceptions for Diesel cars, with the Greens want to remove from the bill.

The second ‘green’ measure in the package is the ‘wrecking bonus’ paid to buyers of new cars when they’re old car is taken out of circulation instead of sold on. Either by design, or (more likely) unintentionally, the bonus has worked like a charm, but not, as hoped, by stimulating buyers to buy German cars (because those that can afford to will normally sell their car on for more of the bonus they would be paid for destrying it), but to import cheap, fuel-efficient cars, the biggest gainer being the Peugeout 307.

In general, the package contains little tageted investment for green measures. Construction work that will be done will conform to high environmental standards, and renovating public buildings will make the more energy efficient, but within the design of the package this seems more incidental, than at the forefront of politicians’ thinking.

4) Umweltgesetzbuch. 0/1?) On the surface, this seems like one of the awfully familiar spats between SPD and CSU about a piece of legislation. But beyond the bickering, this is more important, and an indication of the faultlines in the upcoming election campaign. The project to consolidate the byzantine mess of planning and environemntal regulation into one law, and therefore ensure that planning was as uncomplicated as possible, while making it easier to uphold environmental standards. In the last second, and after years of joined draftingbacked by Angela Merkel, the CSU pronounced it would not support the law without wide-raning changes essentually guaranteeing state autonomy on a wide range of policy, which was duly declined by Sigmar Gabriel, the environmet minister. The fact that the CSU chose to break with the SPD over this declared government intention, and the fact that Angela Merkel has so far declined to step in, the coming months might well show an increasig divergence on climate chane policy.

Sometimes, no news is good news. In a week in which Obama gave US states the ability to enforce tough new standards on car fuel efficiency and emissions, German policymakers managed a last minute turnaround to prevent doing the opposite. The audacity of claiming a shift to environmentally friendly car taxation, while preparing a tax model that would have more than halved taxation for the worst polluting SUVs, was breathtaking. Luckily some in Germany’s governing coalition, namely Sigmar Gabriel, minister for the environment, and Wolfgang Tiefensee, minister for transport, both SPD, must realised the impact this would have with voters, both those interested in climate change and those who questioned why they had to pay the same, while those driving 500hp SUV got a hefty discount. In the end a compromise was found, whose central characteristic is that it will mean every kind of car essentially paying what it is paying now. This was criticised by the LINKE party and environmental NGOs as a ‘wrong signal’ because it did not in fact raise taxation for more polluting vehicles. Yet, one could be forgiven, given recent experience with Germany’s Grand Coalition to give a sign of relief at the fact that things haven’t become even worse.

On a related note, this week brought out a few other interesting bits of information. DEKRA, an car testing association published a report showing that 92 percent of drivers are willing to change to an ‘Umweltauto’, even if it means a smaller range, worse driving performance, or shorter service intervals. Unfortunately, they didn’t ask how much more people were willing to pay…

Another report, this time written by Roland Berger, a consultancy, for the government of the state of Saxony, shows the economic potential of environmental technology. This industry grew by 17 percent in 2007, employs 18.000 people in Saxony alone, and already contributes 6 percent to the states GDP. And, encouragingly, even in the current economic climate the outlook of the companies asked remained positive. Adding to the good news, for the economy and the climate, was the association of energy and water utilities BDEW, stating that renewable energy covered more than 15 percent of total German electricity consumption. This means Germany is already fulfilling the EU renewable energy targets, and, given that much of the technology is produced in Germany, highlights the positive economic impacts courageous action on climate change can have.

Sigmar Gabriel, minister for the environment and former prime minister of lower Saxony, welcomed the second ‘Konjunkturpaket’ (stimulus package), as a chance for both job creation and the environment. Public investment would be subject to environmental guidelines, while changing car taxation to a CO² basis and paying car owners to get rid of old cars (or, rather, for buying new ones), would be a big step towards a more environmentally friendly fleet of cars. Two days after saying this (and after the package was passed), his ministry published a report showing that German companies were holding a large sharge of business in fast-growing environmental technology markets, and had already created 1,8 million ‘Umweltjobs’ (green jobs) in Germany.

Yet, while the growth of companies and jobs in green technologies is certainly encouraging, with regards to the stimulus package’s environmental impact, the reactions of commentators and interested parties was telling. The automotive and construction industries were positive to enthusiastic about the car tax holiday and the bonus to buy new cars. Environmenalists were not. A newspaper commentary reminded readers that Angela Merkel, in 1995 still as minister for the environment, had strongly opposed the idea of a bonus to buyers of new cars, and called the measure ‘ready for the scrap heap’. DHU and VCD, a environmental NGO and a left-leaning motring association, pointed out that most emissions are created when a car is manufactured, and that the bonus only creates an incentive when the value of an old car is below 2500€, this mainly being the case for cars which (because they are small) don’t emit most emissions anyway. Worse, they provide a model calculation showing that under the new car tax proposals (even though they will be based on CO² emissions), the most polluting cars will actually pay a lot less than before.

Those arguing that the measures aimed at the car industry are in fact only a small part of the stimulus package are right, but there is scant evidence of environmental measures elsewhere in it. While spending on infrastructure (such as modernising schools) will a positive impact on energy efficiency, this is accidental rather than reflecting conscious design. The same holds true for much of the package. Even if the car stimuli have (which seems doubtful) a positive environmental impact, they are designed to shore up manufacturing jobs. And the draught of measures stimulating those green industries that have already created 1,8 million jobs in Germany is disappointing, but also suggests that in a time of crisis, most German politics are scared to believe their own rhetoric.