Germany participates in the multilateral climate change legal regime individually and as a member of the European Union (EU), which acts as a negotiating bloc for the 27 EU member states.

Individually, Germany is an Annex 1 party to the United Nations Framework Convention on Climate Change (UNFCCC) and ratified the Paris Agreement on 5 October 2016.

Germany regularly participates in UNFCCC negotiations and is the host country of its Secretariat. Key features of Germany’s participation include its commitment to legally binding emission reduction targets (supporting Net Zero by 2050 at EU level and national climate neutrality by 2045), adaptation measures funded through bilateral and multilateral aid, substantial climate finance contributions of over EUR6 billion annually, capacity-building and technology transfer initiatives, constructive engagement on loss and damage including support for the operationalisation of the Loss and Damage Fund, advocacy for a dynamic interpretation of the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC), and the implementation of comprehensive domestic climate legislation aligned with EU and international climate objectives.

European Union

Germany plays a central role in regional climate change legal regimes, primarily through its deep integration into the European Union’s climate governance framework. As a founding member of the EU and its largest economy, Germany is a key contributor to the EU’s comprehensive legal and policy mechanisms addressing climate change. These regional legal regimes are not only legally binding for Germany but are also strongly shaped by German political, technological, and financial leadership.

The European Union has set the goal of “combating climate change” in its primary law, particularly in Article 191 of the Treaty on the Functioning of the European Union (TFEU).

Over the years, the EU has continuously developed its climate change policy, constantly adapting it to international obligations. A big milestone was the announcement of the European Green Deal in December 2019. The European Green Deal is a growth strategy, which is designed as a political strategy. It does not contain legally binding commandments or prohibitions but rather contains a roadmap and package of necessary measures for each economic sector with the overall goal of reducing emissions. The necessary measures are transposed into binding EU law over the years following the roadmap; this process of transposition is ongoing.

With the European Green Deal, the EU aims for Europe to become the first climate-neutral continent by 2050 and to boost its economic growth at the same time. At the heart of the Green Deal lies the EU Climate Law (Regulation (EU) 2021/1119), which sets a binding target to become climate-neutral by 2050. The interim target for 2030 is to reduce emissions by at least 55% compared to 1990.

A central part for reaching the interim goal is the “Fit for 55” package. This set of legislation is intended to ensure that all sectors of the EU economy are capable of meeting the emission reduction targets.

A central element of the “Fit for 55” package is a comprehensive reform of the European Union Emissions Trading System (“EU ETS”), which was previously limited primarily to energy-intensive industrial plants and intra-European aviation. The reform extends the scope of the existing EU ETS (now often referred to as ETS 1) to international maritime transport.

In addition, the previous free allocation of emission allowances for aviation will be gradually abolished, with partial integration into the international CORSIA system (Carbon Offsetting and Reduction Scheme for International Aviation) being planned.

In addition, a separate emissions trading system (ETS 2) is being introduced for the building and road transport sectors as well as other sectors from 2028 onward.

Alongside the reform of emissions trading, the Effort Sharing Regulation (ESR) is being revised in the non-ETS sector. This regulation obliges member states to reduce emissions in sectors that are not covered by the EU ETS – in particular, transport, buildings, agriculture and smaller industrial plants. The revision as part of “Fit for 55” provides for a significant tightening of national reduction targets by 2030.

For Germany, this means an increase in the binding reduction target to 50% compared to 2005. The ESR contains a binding system for annual reporting, target tracking and sanctions if targets are not met, which is meant to ensure legally robust implementation of the climate targets at member state level.

In order to avoid rising prices of products and services within the EU due to wider application of the ETS and ESR, the EU introduced the Carbon Border Adjustment Mechanism (CBAM). It is a tool to put a price on the carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. The goal of CBAM is to ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU’s climate objectives are not undermined. The CBAM is designed to be compatible with WTO rules. A transitional phase started in 2023, while the whole CBAM entered into force on 1 January 2026. With the Omnibus Package of February 2025, the EU changed some of the CBAM rules to simplify processes, especially for small and medium-sized businesses.

Other Regional Regimes

Germany is also part of the Pentalateral Energy Forum. The Pentalateral Energy Forum is a regional partnership between Belgium, the Netherlands, Luxembourg, Germany, France, Austria and Switzerland. It supports the process of regional integration for a reliable and sustainable European energy market at a political level. One of the topics related to climate protection is the decarbonisation of the energy market within the group’s interconnected electricity grid by 2035.

Germany has also committed itself to nature conservation in international treaties with its neighbours:

The Alpine Convention (AC), formally the Convention on the Protection of the Alps, is a treaty under international law on the comprehensive protection and sustainable development of the Alps.

The Helsinki Commission (HELCOM) is an international organisation established by the Convention for the Protection of the Marine Environment of the Baltic Sea of 1974 (updated in 1992), based in Helsinki, Finland, with the Commission itself being the supreme decision-making body. Denmark, Germany, Estonia, the European Union, Finland, Latvia, Lithuania, Poland, Sweden and Russia work together in HELCOM to protect the Baltic Sea.

Germany’s climate change policy is closely aligned with prevailing climate science, in particular the findings of the Intergovernmental Panel on Climate Change (IPCC), and is shaped by the EU climate framework as well as international obligations under the UNFCCC and the Paris Agreement. Over time, German climate policy has evolved from an initial focus on renewable energy promotion and energy efficiency towards a comprehensive regulatory framework that includes legally binding emission reduction targets, carbon pricing mechanisms and sustainability reporting requirements. More recently, climate litigation, energy security concerns and EU legislation – notably the European Green Deal, the Fit for 55 package and the Corporate Sustainability Reporting Directive (CSRD) – have further accelerated policy development. The current trajectory is characterised by efforts to reconcile ambitious decarbonisation objectives with industrial competitiveness, energy affordability and administrative practicability.

Germany does not submit an individual NDC but is part of the European Union’s collective NDC. At the end of 2025, the European Council (EC) submitted to the UNFCCC an updated version of the EU NDC on behalf of the EU and its member states, replacing the previous ones submitted in 2020 and 2023.

The updated EU NDC template has been prepared against the backdrop of the adoption of the key elements of the Fit for 55-package, which will result in the EU reducing its net greenhouse gas emissions by at least 55% by 2030 (compared to 1990 levels). With the updated NDC, the EU and its member states reaffirm their commitment to this legally binding target.

These targets are unconditional, meaning they are not contingent upon financial or in-kind support from other countries.

The current EU NDC contains the following central objective: a reduction in net greenhouse gas emissions. This relates exclusively to mitigation, ie, the avoidance and reduction of emissions through the mechanisms noted in 1.2 Regional Climate Change Legal Regimes, but also reduction targets for other sectors, eg, transport and energy systems.

In terms of content, the EU NDC does not contain adaptation measures with regard to any quantitative or verifiable targets.

Constitutional Basis

Even though climate protection is not explicitly mentioned in the German Basic Law (Grundgesetz – GG), there are constitutional norms that serve climate protection.

Article 20a, GG contains the constitutional objective of protecting the natural foundations of life. The state is obliged to protect the natural foundations of life and animals in responsibility for future generations. The “natural foundations of life” include climate protection, which has been established by the Federal Constitutional Court. Although Article 20a does not create directly enforceable individual rights, it plays an important interpretative role in shaping climate legislation and administrative decision-making.

In addition, Article 143h(1), GG authorises the Federal Republic of Germany to establish a special fund for additional investments “to achieve climate neutrality by 2045”.

The GG does not contain a specific fundamental right to environmental protection or climate protection. However, the fundamental rights already established can protect against environmental damage by obliging the state to protect its citizens from environmental damage, thus indirectly protecting the environment.

Jurisprudence of the Federal Constitutional Court

A key turning point in the constitutional development of German climate policy was the decision of the Federal Constitutional Court (Bundesverfassungsgericht) in 2021, often referred to as the “climate decision” (Order of the First Senate of 24 March 2021 – 1 BvR 2656/18, ECLI:DE:BVerfG:2021:rs20210324.1bvr265618). In this decision, the Court found that the 2019 version of the Federal Climate Action Act (Bundes-Klimaschutzgesetz – KSG) was unconstitutional in parts as it did not contain sufficient regulations for reducing emissions after 2030. The court concluded that with this omission the legislator had violated the complainants’ fundamental constitutional rights.

The central argument in this decision is the so-called intertemporal safeguarding of freedom. The court made it clear that today’s political decisions on climate protection may not lead to future generations being unreasonably restricted in their freedom. The inadequate specification of the reduction pathways beyond 2030 structurally jeopardised the freedom of future generations since this irreversibly shifted high emission reduction burdens to periods after 2030, to the detriment of future generations. More drastic measures would be necessary to reach the goals after 2030, thereby potentially affecting practically all constitutional freedoms. The relative weight of the climate protection requirement in the balancing of interests will continue to increase as climate change progresses.

The Federal Constitutional Court thus explicitly recognised for the first time that climate protection is not just a simple legal or political objective but is also secured under constitutional law and is closely linked to the protection of individual liberties. The legislator was obliged to adopt regulations beyond the year 2030 by the end of 2022 at the latest. The KSG was already amended in Summer 2021 and the emissions targets for the years 2030 to 2045 were significantly tightened. The climate decision therefore marks a significant milestone in the constitutional development of environmental and climate change law in Germany.

Federal Climate Action Act

The Federal Climate Action Act is the central German federal law in climate mitigation. It is designed to ensure the fulfilment of national climate protection targets as well as compliance with European targets. The Climate Action Act entered into force in December 2019 and enshrines the climate protection and sector targets set out in the Climate Action Plan 2050 in law for the first time: greenhouse gas emissions are to be reduced by at least 65% below the comparable figure for 1990 by 2030 and by at least 88% by 2040. Net greenhouse gas neutrality is to be achieved by 2045.

The law also sets annual reduction targets for the period up to 2040. Maximum annual emission levels have been set for various sectors of the economy until 2030. The sectors are, inter alia, energy, industry, transport, buildings, agriculture and waste management. The law also includes a duty of accountability for the ministries, and an independent scientific monitoring body (expert council).

After a further amendment to the KSG in 2024, compliance with climate targets will no longer be monitored retrospectively and separately by sector. Rather, this will be addressed looking forward, regarding multiple years in advance and adopting a cross-sectoral approach. If it becomes apparent within two consecutive years that the climate target set for 2030 will not be achieved, the members of the federal government will jointly decide in which sector and through which countermeasures remedial action will be taken. Future federal governments must present a programme of measures to achieve the climate target for 2040 at the beginning of their term of office.

Federal Climate Adaptation Act

A major milestone in the context of adaption is the Federal Climate Adaptation Act (Bundes-Klimaanpassungsgesetz – KAnG), which entered into force in July 2024. The law obliges the federal government to develop a national adaptation strategy including risk analyses, measurable goals and concrete measures. The strategy needs to be updated every four years. Also, the federal states (Länder) are required to develop their own strategies and report to the Federal Ministry of the Environment, Climate Action, Nature Conservation and Nuclear Safety (Bundesministerium für Umwelt, Klimaschutz, Naturschutz und nukleare Sicherheit – BMUKN) every two years (Sections 10 and 11, KAnG).

Since 2008, the federal government has been developing a German Climate Adaptation Strategy (Deutsche Anpassungsstrategie an den Klimawandel – DAS). The newest update is from 11 December 2024 and due to the new KAnG, the newest updated version of the DAS contains, for the first time, measurable goals for climate adaptation until 2030 and/or 2050. It aims to protect German citizens from the impacts of climate change, eg, extreme weather events such as floods or extreme heat. The DAS is developed by the government in co-operation with scientists, relevant associations and citizens. The federal government as well as the federal states publish monitoring reports on the evaluation of measures every four years.

Other Laws

Beyond the KSG, Germany uses additional legislative and regulatory measures to implement and support its national climate policy and to contribute to the EU’s NDC under the Paris Agreement. These include the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz – EEG), which promotes the expansion of renewable energy, the Fuel Emissions Trading Act (Brennstoffemissionshandels-Gesetz – BEHG), which introduced national carbon pricing for traffic and heating, and the Building Energy Act (Gebäudeenergiegesetz – GEG), which governs energy efficiency in buildings and decarbonisation in heating.

Reforms to the EEG and the abolition of the GEG were agreed in the coalition agreement of the new German government in April 2025. A revised version of the EEG and a new Building Modernisation Act (Gebäudemodernisierungsgesetz – GMG), intended to replace the GEG, are currently under interministerial co-ordination within the federal government. The GMG would allow new oil and gas heating systems to remain in use for longer provided they gradually incorporate specified shares of renewable fuels, potentially weakening the pace of emissions reductions in the building sector and making Germany’s national climate targets more difficult to achieve.

Support for Farmers

In Germany, climate adaptation measures are supported through a combination of federal and state-level programmes. In the agricultural sector, financial support and advisory services have been established to help farmers adapt to climate-related risks such as droughts, heatwaves and changing precipitation patterns, including through sustainable irrigation practices and climate-resilient cultivation methods. Germany has also expanded initiatives relating to water resource management, flood protection and the restoration of natural retention areas in response to an increase in extreme weather events.

Influence on Environmental Permits

Climate considerations are integrated into permitting procedures in particular through environmental impact assessments, nature conservation law and sector-specific regulatory requirements, for example, in energy, infrastructure and industrial projects. The principal German law governing emission-intensive projects in this context is the Federal Emission Control Act (Bundes-Immissionsschutzgesetz – BImSchG).

In addition, permitting authorities must take into account statutory climate targets under the Federal Climate Change Act and relevant EU legislation, especially where projects may significantly affect greenhouse gas emissions.

Political Debate and Regulatory Pressure (Political Backlash)

Climate policies and regulations have increasingly become the subject of political and public debate in Germany, particularly in relation to energy prices, industrial competitiveness and administrative burdens. This has led to political pressure to streamline or roll back regulatory measures. Recent discussions at both German and EU level reflect efforts to balance ambitious climate objectives with economic and practical considerations. While Germany remains committed to its national and EU climate targets, future climate legislation is likely to place greater emphasis on regulatory flexibility, technological neutrality and reducing compliance burdens for businesses.

Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety

Following elections and a government reorganisation in 2025, the Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety (Bundesministerium für Umwelt, Klimaschutz, Naturschutz und nukleare Sicherheit – BMUKN) is once again the lead ministry and policy authority for national and international climate policy in Germany. The ministry fulfils its tasks through a combination of legal, economic, co-operative and communicative instruments.

One of its core responsibilities is shaping the legal framework for climate change policies. The Ministry prepares legal regulations, drafts laws and ordinances as well as transpositions of EU directives into national law and supports all legislative projects from other ministries that affect its areas of responsibility. In addition, it uses financial support instruments, such as programmes financed by tax revenues or emissions trading. These make it possible to support projects for the research, development and market launch of innovative environmental technologies.

Another important building block is close co-operation at national and international level. Germany is a federal country where the federal government and federal states’ governments regularly consult with each other, for example, in bodies such as the Conference of Environment Ministers or interministerial working groups. At a supranational and international level, the Ministry represents Germany’s interests in the EU and in international organisations such as the UN, the OECD and the WTO.

The activities of the Ministry are rounded off by a comprehensive communication strategy. It informs the public transparently about its activities, provides up-to-date information via the internet and publications and actively promotes the participation of citizens – for example, through events and other participation formats. The aim is to create social acceptance and enable broad participation in environmental and climate policy.

Federal Ministry for Economic Affairs and Energy

Although no longer primarily responsible for climate policy, the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie – BMWE) remains crucial for implementing measures to decarbonise the energy sector, promoting and expanding renewable energy, supporting a green industrial transformation, and designing carbon pricing mechanisms.

Expert Council on Climate Issues

The Expert Council on Climate Issues (Expertenrat für Klimafragen), an independent expert body, was established under the Federal Climate Action Act. It monitors Germany’s annual greenhouse gas emissions and evaluates compliance with legally binding sectoral targets. It provides scientific assessments and policy recommendations to the federal government, thereby enhancing transparency and accountability in climate governance.

German Emissions Trading Authority

The German Emissions Trading Authority (Deutsche Emissionshandelsstelle – DEHSt) is a key regulatory authority for carbon markets. It is part of the Federal Environment Agency (Umweltbundesamt – UBA) and manages both the EU ETS and the national emissions trading system for buildings and transport. It oversees the allocation and verification of emissions allowances, monitors compliance, and ensures the integrity of carbon trading in Germany.

Federal Environment Agency

The UBA is Germany’s central scientific and technical authority on environmental matters. It supports climate policy by producing greenhouse gas inventories, conducting research on climate impacts, and evaluating mitigation and adaptation measures. While it has no direct enforcement power, it provides critical data and analysis for decision-making at all levels of government.

State-Level Environmental Ministries

Each of Germany’s 16 federal states has its own environmental ministry which plays a key role in implementing national climate policies in sectors such as construction, transport, and land use. The co-ordination between federal and state governments occurs through intergovernmental bodies like the Conference of Environment Ministers (Umweltministerkonferenz), contributing to the decentralised nature of Germany’s climate governance.

All authorities are, as part of the executive branch, bound by the constitution and all laws. Hence, all authorities are obliged to obey existing national and European climate laws. The constitutional objective to protect the natural foundations of life under the Basic Law applies to all their actions equally. However, due to the fact that climate change affects all economic sectors, it should be addressed in a cross-sectoral way. The centralisation of climate change matters in one ministry may hinder the practical and equal influence on all relevant sectors. A cross-sectoral integration of climate protection in the executive design could enhance effectiveness of climate change measures.

Climate change-related litigation has become a significant and evolving feature of the national climate change legal landscape in Germany. Over the past decade, and especially following the landmark ruling of the Federal Constitutional Court in 2021, climate litigation has increasingly been used as a tool to shape and accelerate national climate policy, hold the government accountable for inadequate action, and define the scope of fundamental rights in the context of climate protection.

The most prominent litigants are typically non-governmental organisations (NGOs) such as Greenpeace, Germanwatch, Fridays for Future, ClientEarth, and Deutsche Umwelthilfe, often acting in co-operation with private individuals – especially young people – who claim their future rights and freedoms are at risk due to insufficient climate action. Strategic climate litigation in Germany is largely based on individual rights and focuses on the government’s obligations under both national constitutional law and international agreements such as the Paris Agreement.

The central causa in such litigation is the claim that public authorities failed to adopt or implement effective climate protection measures. Plaintiffs often argue that this failure violates constitutional rights, particularly the fundamental rights to life and physical integrity (Article 2, GG), property (Article 14, GG), and the principle of intergenerational equity.

Beyond constitutional challenges, courts have also been venues for lawsuits against government permits for infrastructure projects (eg, highways, airports, and coal power plants) or against corporate actors for their contributions to climate change. One notable case in civil (and transnational) climate litigation is Saúl v RWE. A Peruvian farmer sued the German energy supply group RWE in German civil courts for compensation under tort law for contributing to the melting of Andean glaciers. While Saúl lost the case on 28 May 2025, because there was insufficient threat of impairment to his property due to effects of climate change, this case nevertheless sets a precedent. The Higher Regional Court of Hamm (Oberlandesgericht Hamm) held that emitters may, in general, be held liable under German civil law for consequences of climate change. This decision of the Higher Regional Court of Hamm has given new momentum to climate litigation: in January 2026, 39 Pakistani farmers filed a lawsuit for damages once again against RWE and against a building materials manufacturer before the Regional Court of Heidelberg, seeking compensation for environmental damage that has occurred on their land.

This wave of litigation serves multiple purposes: to enforce or expand legal obligations for emissions reductions, to push for greater transparency and accountability, to clarify the legal responsibilities of states and corporations, and to empower citizens to claim climate justice. The judiciary has increasingly accepted the premise that climate protection is not merely a political goal, but a legally enforceable obligation and right.

In summary, climate litigation in Germany is not only growing in volume but is substantively shaping the legal contours of national climate policy. It plays a critical role in operationalising constitutional environmental rights, enforcing compliance with climate laws, and stimulating legislative reforms. As climate science, legal doctrine, and public concern evolve, this trend is likely to intensify and diversify in both form and impact.

Participation in the Voluntary Carbon Market

The German jurisdiction does permit participation in the voluntary carbon market for companies, other organisations or individuals whose emissions do not fall under the scope of the EU Emissions Trading System.

Regulation of the Voluntary Carbon Market

Voluntary Carbon Markets are still unregulated in Germany. The federal government demands that these markets shall work in accordance with the standards set out in Article 6 of the Paris Agreement. From the federal government’s perspective, certain fundamental principles must be observed, in particular the priority of avoiding and reducing greenhouse gas emissions over offsetting emissions. Providers of offsetting services should clearly emphasise this priority and first inform customers about options for avoiding and reducing emissions before addressing carbon offsetting. The European Commission has recently announced plans to submit concrete proposals for the certification of measures (monitoring, reporting and verifying) that serve to avoid or offset greenhouse gas emissions, with a particular focus on the agricultural sector (Carbon Farming). Numerous experts and stakeholders are to be involved in developing scientifically sound certification methodologies in order to create reliable and transparent standards across European borders.

National Recognition of the Voluntary Carbon Market

In Germany, voluntary carbon credits are not recognised for use within the EU ETS or other domestic compliance schemes for meeting regulatory emission reduction obligations. Voluntary carbon credits are rather explicitly excluded from both the EU ETS and Germany’s national fuel emissions trading system (nEHS/BEHG). The voluntary trade in emission certificates is attributable to neither the EU Emissions Trading System nor the national emissions trading system. This is explained by a fundamental structural difference between the two systems: whereas in existing trading systems certificates are issued for the emission of greenhouse gases, voluntary CO₂ certificates are linked to the offsetting or avoidance of emissions elsewhere. Voluntary carbon credits may, however, be used by companies on a voluntary basis for corporate climate strategies, sustainability reporting or net-zero claims, provided that such use complies with applicable integrity and disclosure requirements, but they have no formal role in statutory emissions trading compliance. The Paris Agreement’s corresponding adjustment mechanism is designed to address this at international level, and future domestic or EU-level rules could potentially create a pathway for linking high-integrity voluntary credits with compliance frameworks – but no such mechanism currently exists in Germany.

Information about voluntary carbon markets is publicly available:

• German Federal Ministry for Economic Affairs and Energy (BMWE) – Voluntary Carbon Markets: Freiwilliger Kohlenstoffmarkt | BMWE (last accessed 1 June 2026).
• Federal Environment Ministry – Carbon Mechanisms (last accessed 1 June 2026).
• The German Environment Agency (Umweltbundesamt – UBA) (last accessed 1 June 2026).

International Trade Considerations of the German Government

The German government considers a functioning global carbon market to be a key instrument in international climate protection and has worked to anchor carbon markets in the Paris Agreement and thus establish a stable long-term price for greenhouse gas emissions. Hence, Germany’s carbon pricing framework, based on the EU ETS (implemented domestically via the TEHG – the Greenhouse Gas Emissions Trading Act) and the national emissions trading system (nEHS, enacted through the BEHG), is closely linked to both EU climate policy and international trade considerations.

The primary international trade concern is carbon leakage: the risk that energy-intensive industries relocate production to jurisdictions with lower carbon costs, undermining both EU competitiveness and global emissions reductions. This is addressed through the CBAM, which imposes a carbon cost on certain imports to ensure a level playing field between EU producers and importers from jurisdictions with lower environmental standards. CBAM is also functioning as a driver of global carbon pricing uptake, incentivising trading partners to introduce equivalent mechanisms.

Implications for Importers and Exporters

For importers into Germany/the EU

Since January 2026, importers of goods in the six CBAM sectors (aluminium, cement, electricity, fertilisers, hydrogen, iron and steel) must purchase CBAM certificates reflecting the embedded carbon cost of their products, linked to the EU ETS price. Importers may deduct carbon costs already paid in the country of origin. Excluded are EEA states (Norway, Iceland and Liechtenstein) and Switzerland, which participate in or are linked to the EU ETS. By 2030, CBAM will be extended to all EU ETS sectors.

For exporters from Germany/the EU

CBAM applies only to imports, not exports. German exporters of carbon-intensive goods therefore bear the full EU ETS carbon cost in production but receive no equivalent border protection when selling into third-country markets with weaker carbon pricing – a recognised competitive disadvantage.

Under the European Climate Law, Germany is also required to report its national emissions and comply with the reduction goals set out for Germany. A national monitoring obligation of sectoral emissions is enshrined in Section 5 of the KSG.

International Co-Ordination and Alignment

Germany and the EU pursue alignment through several channels. The EU Task Force for International Carbon Pricing and Markets Diplomacy promotes global carbon pricing and supports Article 6, Paris Agreement (PA) implementation. CBAM acts as an indirect alignment driver, incentivising trading partners to introduce equivalent mechanisms. At multilateral level, Germany and the EU participate in ICAP, the World Bank’s Partnership for Market Implementation, the Global Carbon Pricing Challenge, and the Open Coalition on Compliance Carbon Markets.

ESG Reporting Requirements

Under current German law, big corporations (ie, those with over 500 employees) are required to file a so-called non-financial statement within their annual report under Section 289b of the Commercial Code (Handelsgesetzbuch – HGB).

This ESG report must contain information on environmental concerns, employee concerns, social concerns, respect for human dignity and the fight against corruption and bribery. In the case of environmental issues, the information may relate, for example, to greenhouse gas emissions, water consumption, air pollution, the use of renewable and non-renewable energies or the protection of biodiversity.

With the introduction of the CSRD, the scope of application was significantly expanded. However, member states raised concerns about the resulting administrative burden, prompting reforms adopted under the so-called “Omnibus Package” in February 2025. The Omnibus Directive was published in the Official Journal of the EU on 26 February 2026 and entered into force on 18 March 2026, introducing substantial amendments to the CSRD. Under the revised framework, mandatory sustainability reporting generally applies only to companies with more than 1,000 employees and annual net turnover exceeding EUR450 million. The reform is expected to significantly ease compliance obligations and reduce the number of companies subject to the CSRD. In addition, reporting requirements for companies that were originally due to enter the reporting regime in later waves had already been postponed by two years under the “Stop-the-Clock” Directive, which entered into force in April 2025; the Omnibus I Directive does not alter those amended timeframes.

In addition, there are reporting obligations under the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz– LkSG). The LkSG requires companies with 1,000 or more employees to take measures to prevent human rights violations and environmental harm in their supply chains. Companies covered by the law must submit annual reports on their due diligence measures and publish them free of charge and accessible for seven years on their website. However, in the coalition contract of the new German government, the parties agreed to abolish the LkSG. It is to be replaced by a law on international corporate responsibility that implements the European Supply Chain Directive (CSDDD) in a low-bureaucracy and enforcement-friendly manner. The reporting obligation under the LkSG shall be abolished. Accordingly, the federal government has introduced a draft bill which represents an interim measure pending the final national transposition of the CSDDD, aimed at reducing administrative burdens during the transitional period while improving the practicability and enforceability of the existing LkSG framework. As the Omnibus Package by the EU proposes significant amendments to the CSDDD, it remains to be seen how Germany will transpose the reformed version into German law.

Influence of the TCFD

The work and recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) influence national policy and regulatory positions on climate change liability and reporting in different ways.

According to the current legal situation, companies can use a national, European or international framework for their non-financial statement (Section 289d of the Commercial Code), which they are required to do under applicable German law. A not inconsiderable number of DAX, MDAX and SDAX companies use the recommendations of the TCFD.

However, there is a change with the European Corporate Sustainability Reporting Directive. The application of the European Sustainability Reporting Standards (ESRS) will become mandatory. The CSRD entered into force on 5 January 2023 and must be applied for the first time in reports covering the 2024 financial year; ie, published in 2025. EU member states were required to transpose the directive into national law by 6 July 2024. However, Germany has not yet completed the transposition process. A draft bill was introduced in March 2024, but the legislative process stalled due to political developments. As a result, the European Commission initiated an infringement procedure against Germany in September 2024 due to the failure to complete the transposition. Moreover, the EU Omnibus Package will, when adopted, postpone the reporting obligation to 2027. On 29 September 2025, the federal government submitted a new draft bill to parliament, which is currently undergoing the legislative process. The draft aims at a one-to-one transposition of the CSRD and already incorporates the amendments introduced by the Omnibus Package.

Nevertheless, the recommendations of the TCFD remain important. Both the basic structure of the TCFD recommendations (governance, strategy, risk management, targets and indicators) and the climate-related disclosures recommended by the TCFD have been incorporated into their respective standards.

Reporting Under IFRS S1 and IFRS S2

IFRS S1 and IFRS S2, issued by the International Sustainability Standards Board (ISSB), are designed to establish a global baseline for sustainability-related financial disclosures. In Germany, companies are not legally required to report under IFRS S1 and IFRS S2, as these standards do not constitute mandatory reporting requirements under national law or EU legislation. Within the EU regulatory framework, sustainability reporting is primarily governed by the Corporate Sustainability Reporting Directive (CSRD) and the ESRS. Under the CSRD regime, companies are required to report in accordance with ESRS. While ESRS and IFRS S1 and S2 are conceptually aligned in several areas, they differ in important respects, including their underlying materiality concepts. As a result, the two frameworks are not fully interoperable, although certain disclosure requirements partially overlap. Although IFRS S1 and S2 are not binding in Germany or the EU, they are highly influential at the international level. They are expected to serve as a global reference framework for sustainability reporting, and companies with significant exposure to international capital markets may voluntarily incorporate elements of IFRS-based reporting to enhance comparability for global investors.

German criminal legislation does not provide for a specific form of personal liability related to the impacts of climate change. Sanctions against individuals can nevertheless be considered, if environmental law is violated or documentation obligations are breached. However, as explained in 2.6 Climate Litigation, companies can be held liable under German civil law.

Environmental (Punitive) Law

According to the current legal situation in German criminal law, legal entities are not subject to criminal liability. Accordingly, only the natural persons acting within a legal entity can be criminally prosecuted and not the company itself.

There are no criminal offences in the German criminal code that punish action that could have an impact on climate change. Instead, offences such as soil pollution, air pollution or causing noise, vibrations and non-ionising radiation are punished with prison sentences of up to ten years. Fines are imposed for less serious offences.

Non-Financial Reporting

Certain companies must submit a so-called non-financial statement (see 4.1 Liability for Climate Change and ESG Reporting for further details). The non-financial statement in accordance with Section 289b of the Commercial Code must also include disclosures on environmental matters. Violations in this context can lead to sanctions.

Pursuant to Section 331 (1) and (2) of the HGB, anyone who, as a member of the authorised representative body or the supervisory board, knowingly misrepresents or fails to disclose material facts concerning the corporation is liable to a prison sentence of up to three years. This explicitly includes non-financial reporting. Consequently, anyone who makes incorrect disclosures in the context of sustainability reporting under the current non-financial reporting requirements or, in the future, under the CSRD, may be liable to prosecution under the HGB.

In addition, there is a risk of fines under Section 334 (1) No 3 and No 4, HGB. These provisions apply to any member of the authorised representative body or supervisory board of a corporation who commits violations of the national regulations on non-financial reporting (Section 289 et seq, HGB), which serve, among other things, to implement the CSRD. In such cases, companies may be subject to fines of up to EUR2 million or twice the economic benefit obtained through the offence. In the case of a capital market-oriented corporation, the fine can even be up to EUR10 million or 5% of the total annual turnover of the previous financial year.

Liability can only be considered under the conditions stated in 4.2 Directors’ Climate Change Liability. Under German law, shareholders and parent companies are generally not liable for company actions due to the principle of separate legal personality. Exceptions apply only in rare cases, such as unlawful instructions or when specific legal duties are assumed under climate or environmental law.

In Germany, climate change policy is strongly influenced by growing public expectations for ambitious decarbonisation measures, increased corporate accountability and greater transparency regarding environmental impacts. Climate change is increasingly seen as a legal and regulatory obligation, not a voluntary sustainability policy, reinforced by frameworks such as the CSRD, EU Taxonomy and related climate legislation. At the same time, there is strong societal expectation that industry, especially high-emission sectors, takes responsibility for enabling the transition without undermining competitiveness or jobs. Financial markets add further pressure, as ESG expectations from investors have made climate risk a mainstream financial risk factor, affecting access to capital. In parallel, rising climate litigation and stronger disclosure requirements increase concerns about legal liability and reputational risk. In recent years, however, political debates around competitiveness, energy costs and regulatory burden have contributed to a somewhat more balanced tone, and parts of the ESG momentum, particularly in public discourse, appear to have moderated compared to the stronger emphasis seen in earlier phases of the transition.

In Germany, climate change due diligence is not yet uniformly or explicitly mandated by law in the context of mergers and acquisitions (M&A), finance, or real estate transactions. However, in general, ESG compliance has become more important in the context of corporate transactions.

Besides the LkSG and the CSRD, the EU Taxonomy Regulation (Regulation (EU) 2020/852) sets the framework for sustainable finance and contains additional reporting obligations. It is a market transparency tool that classifies economic activities that are aligned with a net zero trajectory by 2050 and broader environmental goals besides climate. It aims to support the 2030 climate goals by fostering direct investments in sustainable projects and activities. Under the Taxonomy Regulations, companies need to report – in addition to their financial reporting obligations – on how their activities affect or contribute to environmental goals pursuant to the Regulation, such as climate protection, adaptation to climate change and, since 2023, the circular economy and biodiversity. The report also indicates sales, Capital Expenditures (CapEx) and Operating Expenditures (OpEx).

While the Regulation itself does not apply to individual transactions, these reports become more relevant for buyers or investors in order to determine if a company is acting in compliance with the Regulation. Hence, the due diligence usually looks at sales, CapEx and OpEx and their compliance with the Regulation. Businesses with many Taxonomy-activities are considered more attractive for ESG-oriented investors.

With the new Omnibus Package, the Taxonomy Regulation was amended and now only applies to businesses with more than 1,000 employees and a net turnover exceeding EUR450 million.

Germany supports the expansion of renewable energies through various instruments.

Under the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz – EEG), different renewable energy projects are eligible for subsidies. Renewable energies covered under this Act include hydropower, wind and solar energy, geothermal energy and biomass. With the amendment of 2023, Section 2, EEG declares the expansion of renewable energies in the “overriding public interest” until electricity generation in Germany is greenhouse gas neutral. This results in a change in administrative decisions due to the increased priority of renewable energies over other interests, especially when it comes to permits. In addition, the EEG contains fixed expansion targets for 2030 and 2045 specifically for solar and wind energy.

Along with other measures to facilitate the issuing of permits for renewable energy plants, the number of permits granted has increased significantly. For example, 90% more permits for onshore wind energy were issued in 2024 compared to 2023. This was followed by a further 48% increase in permits in 2025 compared to 2024.

The EEG has two main mechanisms which are meant to encourage investment and, in doing so, promote the expansion of renewable energy.

• The principle of priority, meaning that renewable energy sources must be granted priority access to the grid, and their energy must be accepted and fed into the grid before that of other, fossil-based energy sources.
• Operators of renewable energy installations receive a guaranteed payment for every kilowatt-hour of electricity they feed into the public grid – either as a fixed feed-in tariff (for small installations, typically up to 100 kW) or as a “market premium” that tops up the wholesale market price to a pre-determined level (for larger installations selected through competitive auctions). Both support forms are guaranteed for 20 years from the date of commissioning, providing long-term revenue certainty that reduces investment risk and encourages the deployment of renewable energy capacity.

In construction, private individuals and companies can obtain grants and loans for heat pumps, biomass heating systems, and solar thermal energy through the Federal Subsidy for Efficient Buildings (Bundesförderung für effiziente Gebäude– BEG), among other programmes. Moreover, the KfW Bank (Kreditanstalt für Wiederaufbau) offers low-interest loans and repayment subsidies for photovoltaic (solar), wind, hydroelectric, and biomass systems. The Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle– BAFA) provides subsidies specifically for solar thermal, biomass, and heat-pump heating systems.

There are also indirect tax incentives: private individuals, for example, benefit from energy-efficient renovation (Section 35c of the Income Tax Act (Einkommensteuergesetz (EStG)), which allows a tax reduction of 20% of the costs – up to EUR40,000 per property.

Another new approach is the German government’s “climate protection agreements”, which are designed to provide financial relief to companies in emission-intensive industries as they switch to climate-friendly technologies. In addition, many federal states and municipalities offer additional bonuses for photovoltaics and electricity storage. For example, large cities such as Munich and Cologne subsidise the purchase of PV systems and electricity storage systems with up to EUR300 per kilowatt-hour of storage capacity, with the exact amount depending on the power output range of the system and the applicant.

Germany promotes climate-friendly investment through regulatory frameworks like the CSRD and the EU Taxonomy Regulation, which enhance sustainability reporting and support ESG-focused finance. The Omnibus Package recently refined these rules by limiting their scope to larger companies to reduce administrative burdens. See 2.5 Bilateral/Multilateral Co-Operation Under the Paris Agreement, 4.1 Liability for Climate Change and ESG Reporting and 5.1 Due Diligence for detailed information.

Regarding CCUS (carbon capture, utilisation and storage), Germany has recently reformed its Carbon Dioxide Storage Act (Kohlendioxid-Speicherung-und-Transport-Gesetz – KSpTG) in late 2025. The reform aims to support the use of CCS (carbon capture and storage) and CCUS, mainly by allowing the construction of CO2 pipelines and CO2 storage facilities in Germany’s continental shelf and exclusive economic zone (EEZ) and accelerating approvals by declaring such pipelines and storage facilities to be of overriding public interest.