Climate Change Regulation 2025 Comparisons

Treaty Participation

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 European member states.

Individually, Germany is an Annex 1 party to the United Nations Framework Convention on Climate Change (UNFCCC). It ratified the Kyoto Protocol on 31 May 2002 and the Paris Agreement on 5 October 2016.

Key Positions

Mitigation

Germany is a strong supporter of ambitious emissions reduction targets. Within the EU, Germany backs Net Zero by 2050 pathways. The national goal of reaching climate neutrality by 2045 is established by the Federal Climate Action Act (Bundes-Klimaschutzgesetz – KSG) (see more in 2.2 National Climate Change Legal Regime).

Adaptation

Germany recognises adaptation as a core pillar of climate action, especially for vulnerable countries. Through bilateral and multilateral aid – eg, via the German Society for International Cooperation (Gesellschaft für Internationale Zusammenarbeit – GIZ), the Credit Institute for Reconstruction (Kreditanstalt für Wiederaufbau – KfW) and the Green Climate Fund – Germany funds adaptation measures in developing countries. It advocates for strengthening the Global Goal on Adaptation and supports integrating adaptation into national and local planning.

Climate finance

Germany is one of the largest contributors to international climate finance, providing over EUR6 billion annually, and meeting its fair share of the USD100 billion collective goal.

Capacity-building and technology transfer

Germany actively funds and implements capacity-building initiatives, especially through the International Climate Initiative (Internationale Klimaschutzinitiative – IKI) and partnerships with developing countries. It supports open, co-operative technology development and climate innovation, and contributes to mechanisms such as the UNFCCC’s Technology Mechanism.

Loss and damage

Germany supports constructive engagement on loss and damage, including the operationalisation of the loss and damage fund agreed at COP27. It acknowledges historical responsibilities and advocates for solidarity-based solutions, including innovative financing mechanisms. In addition to the Fund for Responding to Loss and Damage (FRLD), Germany contributes to combating climate change-related loss and damage through technical support via the Santiago Network. Other initiatives, such as the Global Climate Risk Shield, successfully aim to fight loss and damage with pre-arranged financial mechanisms for other countries affected by climate emergencies.

Equity and CBDR-RC

In agreement with the EU, Germany supports a dynamic interpretation of the Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) principle, calling for economically strong emerging economies such as China and the Gulf States to take on increasing responsibility. In the run-up to COP29, German ministers called on these countries to become more involved in climate financing. They emphasised the need for G20 countries to take responsibility, and that Germany expected contributions from other major emitters.

EU

Germany plays a central role in regional climate change legal regimes, primarily through its deep integration into the EU’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 EU 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, repeatedly 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 that is designed as 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 road map; this process of transposition is ongoing.

With the European Green Deal, the EU aims 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 of 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 EU 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 I) 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 (Carbon Offsetting and Reduction Scheme for International Aviation) system being planned.

In addition, a separate emissions trading system (ETS II) was introduced for the building and road transport sectors as well as for other sectors from 2027 onwards.

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 the CBAM is to ensure that 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 enters into force in 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, 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 EU, Finland, Latvia, Lithuania, Poland, Sweden and Russia work together in HELCOM to protect the Baltic Sea.

The Federal Climate Adaptation Act

A major milestone in the context of adaptation 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, 11 KAnG).

Already 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; 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 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.

Collective EU NDC

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

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 on 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 mentioned 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.

Biennial Transparency Report

Germany submitted its first Biennial Transparency Report (BTR1) to the UNFCCC on 18 November 2024, in line with the Enhanced Transparency Framework of the Paris Agreement. This report provides a comprehensive overview of Germany’s progress in climate action, encompassing mitigation efforts, adaptation strategies, and support provided to developing countries.

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; this has been established by the Federal Constitutional Court.

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.

The Federal Climate Action Act

The Federal Climate Action Act (Bundes- Klimaschutzgesetz – KSG) is a German federal law 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. If the permitted annual emission level for a sector is exceeded, the responsible federal ministry must submit an immediate action programme within three months (Section 8 KSG). The sectors are (inter alia) energy, industry, transport, buildings, agriculture and waste management. The law also includes a duty of accountability for the ministries, an independent scientific monitoring body (expert council) and immediate programmes if targets are not met.

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). In this decision, the court found that the 2019 version of the 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 legislature 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 legislature 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.

Further Amendment of the KSG in 2024

A further amendment to the KSG was adopted in 2024. In the future, compliance with climate targets will no longer be monitored retrospectively and separately by sector. Rather, this will be addressed looking forwards, 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.

The Federal Climate Adaptation Act

As described in 2.1 National Climate Change Policy, the Federal Climate Adaptation Act (Bundes-Klimaanpassungsgesetz – KAnG) entered into force in July 2024 and obliges the government to protect citizens from impacts of climate change by taking necessary precautions and measures.

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. It remains to be seen if and how this will be implemented.

Article 6.2: Bilateral Partnerships

Germany concluded 11 bilateral partnerships (eg, Pakistan, Rwanda, Colombia) and one regional partnership with the Western Balkans. The partnerships aim to support these countries in implementing their national climate goals and adapting to climate change. In doing so, the partnerships combine climate goals with social and economic development in line with the UN Sustainable Development Goals (SDGs). The partnerships’ central goal is to ensure that the transformation necessary for achieving the climate goals is socially just (“just transition”) by involving civil society, trade unions, the private sector, and science and academia.

The partnerships are designed to exist long-term, and the governments involved agree on quantifiable goals. They build on the partner countries’ NDCs, adaptation strategies (eg, national adaptation plans) and long-term strategies, as well as the SDGs and national sustainability strategies. They support the partner countries in engaging in international climate alliances and initiatives by:

• supporting and monitoring climate policies;
• helping to engage with all stakeholders (as well as civil society and the private sector); and
• providing financial means and aid in mobilising additional donors and resources.

Each partnership has individual goals and focuses on different sectors – eg, energy transition or climate adaptation. Details on each partnership can be found in the factsheets for each partnership on the website of the Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung – BMZ).

Article 6.4: Paris Agreement Credit Mechanism

Germany has not used the Paris Agreement Credit Mechanism (PACM). It supports the Partnership for Market Implementation (PMI), which assists countries in the acceleration of global decarbonisation by designing, piloting and implementing carbon pricing instruments. This is necessary to determine the NDCs and hence transfer carbon budgets from one country to another.

Article 6.8: Non-Market Approaches for Implementation of NDCs

Germany supports the Supporting Preparedness for Article 6 Cooperation (SPAR6C) programme. It helps national governments of four partner countries to develop the necessary technical infrastructure to increase national climate protection ambitions, engage private sector actors, and share research results and lessons learned from national experiences with the international community.

Additionally, Germany supports Innovate4Climate (I4C), which is a global exchange forum that promotes dialogue between the public and private sectors to mobilise financing for climate action. It brings together leaders from government, industry, business, finance and technology to facilitate a dialogue on innovative climate finance models.

The 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 the national and international level. Germany is a federal country where the federal government and federal state 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.

The 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.

The 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.

The 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.

The Federal Environment Agency (UBA)

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 such as 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 of protecting 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 that 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, 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 as there was no sufficient 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. It remains to be seen what impact this decision will have for future climate litigation in Germany.

This wave of litigation serves multiple purposes:

• to enforce or expand legal obligations for emission 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.

The instruments and framework used for climate change mitigation in Germany have been discussed in 1.2 Regional Climate Change Legal Regimes and 2.2 National Climate Change Legal Regime. A brief summary is as follows.

The Federal Climate Action Act (KSG) forms the central legal basis by setting legally binding reduction goals. This framework is supplemented by two market-based control instruments for CO₂ pricing:

• the EU ETS – this system is implemented in national law through the Greenhouse Gas Emissions Trading Act (Treibhausgas-Emissionshandelsgesetz – TEHG); and
• a national emissions trading system (Nationaler Emissionshandel – nEHS) enshrined in the Fuel Emissions Trading Act, which has been in force since 2021.

Under the European Climate Law, Germany is 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.

In 2020, Germany adopted the Coal Phase-out Act (Kohleausstiegsgesetz – KohleAusG) and the Coal-fired Power Generation Termination Act (Kohleverstromungsbeendigungsgesetz – KVBG). This is of considerable importance for climate protection and climate change mitigation. The legislature has set the goal of gradually reducing coal-fired power generation, with the aim of ending it by 2038.

Among other things, an orderly decommissioning path to 2038 was agreed, according to which the net nominal electrical output of hard coal and lignite plants is to be reduced to 30 gigawatts in 2022, to 17 gigawatts in 2030 and to 0 gigawatts by the end of 2038 at the latest (Section 4 KVBG: target level). A review of the decommissioning planned for after 2030 should also take place at the review dates of 2026 and 2029, in order to end coal-fired power generation by 2035 if possible (Section 54 KVBG).

Lignite-fired power plants are decommissioned based on public law contracts between the federal government and the power plant operators. The operators receive compensation. In contrast, operators of hard coal-fired power plants do not receive any fixed compensation; instead, decommissioning takes place via contingent tenders, in which the historical CO₂ emissions and the grid relevance of the plant are taken into account in addition to the price. While the former government had planned to end coal-fired power generation in 2030 rather than 2038, the new coalition is aiming for the 2038 phase-out.

Germany has developed a comprehensive legal and strategic framework for climate adaptation, primarily through the Federal Climate Adaptation Act (Klimaanpassungsgesetz – KAnG) and the German Climate Adaptation Strategy 2024 (Deutsche Klimaanpassungsstrategie 2024).

The KAnG constitutes a binding statutory instrument that imposes concrete legal obligations on federal, state and local authorities to develop, implement and update adaptation strategies and measures. These instruments have cross-sectoral effect and require the systematic integration of climate resilience considerations into administrative practice, spatial planning and permitting procedures (as set out more precisely in 2.1 National Climate Change Policy).

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 to thus establish a stable long-term price for greenhouse gas emissions. For more details on German activity in this regard, see 2.3 Bilateral/Multilateral Co-Operation.

Germany will be significantly impacted by the EU’s Carbon Border Adjustment Mechanism (CBAM), given its status as Europe’s largest industrial economy and as a major importer of carbon-intensive goods. The CBAM, as described in 1.2 Regional Climate Change Legal Regimes, is an EU climate policy instrument designed to prevent carbon leakage by imposing a carbon price on certain imports, ensuring that imported products are subject to similar carbon costs as goods produced within the EU under the EU ETS.

The actual consequences of the CBAM cannot yet be predicted. According to an independent study from 2024, Germany’s price-adjusted gross domestic product (GDP) will be 0.17% lower by 2040 as a result of the CBAM, compared to a world without a CBAM scenario. The lower GDP level is due to net exports – ie, lower exports, and lower private demand due to the higher price level.

However, the European Commission has proposed comprehensive changes to the CBAM with Omnibus Package I. Should these changes come into force, a quantity threshold of 50 tonnes of CBAM goods per year could be introduced, which would exempt declarants with imports below this threshold from the CBAM obligation. In addition, the start of the sale of CBAM certificates by member states has been postponed from January 2026 to February 2027 in order to avoid uncertainties in implementation.

The work and recommendations of the Task Force on Climate Related Financial Disclosures (TCFD) influences 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 Commercial Code (Handelsgesetzbuch – HGB)), which they are obliged to do under implemented German law. A not inconsiderable number of DAX, MDAX and SDAX companies use the recommendations of the TCFD.

However, a change has occurred with the European Corporate Sustainability Reporting Directive (CSRD). 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, those 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. Moreover, the EU Omnibus Package will, when adopted, postpone the reporting obligation to 2027.

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.

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 2.5 Climate Litigation, companies can be held liable under German civil law.

Environmental (Punitive) Law

According to current German criminal law, legal entities are not subject to criminal liability. Accordingly, only 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 actions 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 6.4 ESG Reporting and Climate Change for further details).

The non-financial statement in accordance with Section 289b of the Commercial Code (Handelsgesetzbuch – HGB) must also include disclosures on environmental matters. Violations in this context can lead to sanctions.

Pursuant to Section 331(1) and (2) 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) Nos 3 and 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 (Sections 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 from 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 6.2 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.

Under current German law, only big corporations (ie, those with over 500 employees) are required to file a so-called non-financial statement within their annual report.

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 energy; 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 in the so-called Omnibus Package in February 2025. This package not only extends the deadline for implementing the CSRD but also introduces substantive changes. In the future, only companies with more than 1,000 employees and either a turnover exceeding EUR50 million or a balance sheet total above EUR25 million will be required to submit a sustainability report under the CSRD. This is expected to reduce the number of reporting companies by around 80% and ease compliance obligations. Moreover, the start of the reporting obligation for companies initially required to report from 2025 onwards has been postponed to 2027, if/when the Omnibus Package enters into force.

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, publish them free of charge and make them 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 EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive – CSDDD) in a low-bureaucracy and enforcement-friendly manner. The reporting obligation under the LkSG shall be abolished. As the CSDDD is part of the new Omnibus Package by the EU, it remains to be seen how Germany will transpose the reformed version into German law.

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 become more important in the context of corporate transactions.

Besides the LkSG and the CSRD, the EU Taxonomy Regulation (Regulation (EU) 2022/852) 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 Regulation, companies (more than 500 employees and capital market-oriented) need to report – besides 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, on circular economy and biodiversity (for example). The report should also indicate 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 whether a company is acting in compliance with the Regulation. Hence, the due diligence usually looks at sales, CapEx and OpEx, and at 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 also amended and now only applies to businesses with more than 1,000 employees and with a net turnover of up to EUR450 million.

Germany supports the expansion of renewable energy 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 2023 amendment, Section 2 EEG declares the expansion of renewable energies to be 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. Also, the EEG contains fixed expansion targets for 2030 and 2045 specifically for solar and wind energy.

Together 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.

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, 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 photovoltaic systems and electricity storage systems with up to EUR300 per kilowatt hour of storage capacity.

Germany promotes climate-friendly investment through regulatory frameworks such as the CSRD and the EU Taxonomy Regulation, which enhance sustainability reporting and support ESG-focused finance. Although no specific processes under Article 6.8 of the Paris Agreement exist yet, these instruments encourage transparency and align with EU climate goals. The Omnibus Package recently refined these rules by limiting their scope to larger companies to reduce administrative burdens. Please see 2.3 Bilateral/Multilateral Co-Operation and 7.1 Due Diligence for detailed information.