Article 20a of the German Constitution lays down the foundation of environmental policy. Similar provisions can be found in most constitutions of federal states (Bundesländer). According to this guiding principle, all actions by government entities, including the enforcement of laws by public authorities, must take into account the protection of the environment. Authorities and courts therefore resort to Article 20a when interpreting and applying provisions that give them discretionary powers.

Environmental law in Germany is not codified into one unified environmental code. Rather, German environmental law consists of several separate bodies of law, for example:

Climate protection and energy regulation under the Climate Protection Act (Klimaschutzgesetz), the Renewable Energy Act (Erneuerbare-Energien-Gesetz) and the Energy Conservation Act (Gesetz zur Einsparung von Energie in Gebäuden);

• Nature and landscape conservation under the Federal Nature Conservation Act (Bundesnaturschutzgesetz);
• Immission control under the Federal Immission Control Act (Bundesimmissionsschutzgesetz);
• Soil protection under the Federal Soil Protection Act (Bundesbodenschutzgesetz) and the Federal Contaminated Sites Ordinance (Bundesbodenschutzverordnung);
• Waste control, management and disposal under the Waste Management Act (Kreislaufwirtschaftsgesetz).

Additional environmental legislation includes the Environmental Impact Assessment Act (Umweltverträglichkeitsprüfungsgesetz), the Environmental Information Act (Umweltinformationsgesetz), the Environmental Damage Act (Umweltschadensgesetz) and the Environmental Appeals Act (Umweltrechtsbehelfsgesetz). Climate protection regulations can also be found in criminal law provisions. This strict set of rules has led commentators to describe Germany as an ‘environmental state’, i.e. a state that regards environmental protection as one of its central missions. This perception has been further substantiated by the “climate jurisprudence” of the German Federal Constitutional Court (Bundesverfassungsgericht).

New provisions allowing for swifter administrative permit procedures have been adopted in recent years. These include the Act to speed up planning and approval procedures in the transport sector (Gesetz zur Beschleunigung von Planungs- und Genehmigungsverfahren im Verkehrsbereich), the Act to further accelerate planning and approval procedures (Gesetz zur weiteren Beschleunigung von Planungs- und Genehmigungsverfahren), the Act to improve climate protection in immission control (Gesetz zur Verbesserung des Klimaschutzes beim Immissionsschutz) and the Fourth Red Tape Reduction Act (Viertes Bürokratieentlastungsgesetz). In 2024, the last two acts led to the inclusion of the climate as a protected asset in the Federal Immission Control Act. Furthermore, the possibility has been created to speed up procedures by allowing the period for public participation in approval procedures involving environmental impact assessments to be shortened accordingly.

Primarily, authorities of the federal states are responsible for enforcing environmental requirements, regardless of whether they concern federal law. Their explicit competence depends on the act concerned and the administration structure of the federal state. On the federal level, only a few authorities are relevant, e.g. the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (Bundesministerium für Umwelt, Naturschutz, nukleare Sicherheit und Verbraucherschutz) and the Federal Environmental Agency (Umweltbundesamt).

Legal instruments to enforce environmental requirements include forcing a permit holder to comply with the permit, levy an enforcement fine (Zwangsgeld), impose administrative fines (Bußgeld), carry out necessary measures at the expense of the operator (Selbstvornahme), revoke permits, or shut down a facility. In rare cases, criminal liability is possible, even if no environmental damage has been caused.

Licences (Bewilligungen) and permits (Genehmigungen). Their requirements are contained in several environmental statutes. German law does not provide a single, all-encompassing environmental permit. A project may require several authorisations from different authorities. However, some permits do aggregate several environmental law allowances (Konzentrationswirkung), i.e. they replace all or most of the other permits that would otherwise be necessary (most importantly, permits under the Federal Immission Control Act).

Whether a permit can be transferred depends on the following distinctions: A specific personal permit (Personalkonzession), contains personal elements inseparable from the permit holder, whereas an object-related permit (Sachkonzession) is independent of personal elements, e.g. related to property or installations. Generally, personal permits – which are very rare in environmental law – cannot be transferred from one person to another. Object-related permits (e.g. an operator permit pursuant to the Federal Immission Control Act) exist independently of the operator’s identity and can therefore usually be transferred, usually done when transferring the plant or property.

In case of an authority’s refusal to grant an environmental permit, an applicant may appeal the decision to the authority or (subsidiarily) by court action. An applicant may also appeal against individual conditions stipulated in a permit, when considered unduly onerous. Appeals generally have to be filed within one month of the authority’s decision. If the higher authority dismisses the appeal, this gives way to appeal to the administrative court. Generally, in order to have standing, applicants must demonstrate the possibility that the authority’s refusal to grant a permit may violate their rights. However, some provisions give standing to environmental or nature conservation associations (NGOs) allowing them to appeal on behalf of the rights of a third party.

In most federal states, an appeal procedure has two phases: The applicant must generally initiate an appeal proceeding (Widerspruchsverfahren), addressed to the competent authority, before bringing an action before an administrative court. In these procedures, the higher authority will review the appeal. If the appeal is conceded by the court, it can: (i) remit the case to the authority and require the authority to grant the permit; (ii) repeal the unduly onerous condition; or (iii) order the authority to re-consider the application, considering the court’s decision. Which course of action follows, depends on the prerequisites of the provision concerned.

Two types of impact assessments exist: The environmental impact assessment (Umweltverträglichkeitsprüfung, or UVP) and the strategic environmental assessment (strategische Umweltprüfung, or SUP). Environmental assessments involve the identification, description and evaluation of the significant effects of a project, plan or program on the protected assets. Their aim is to pro-actively determine potential environmental impacts at an early stage. Both are subject of the Environmental Impact Assessment Act (Umweltverträglichkeitsprüfungsgesetz). The EIAs are used to assess the impact of new industrial facilities and infrastructure projects. They increase public acceptance and participation in such projects by providing a transparent view of the adverse effects on human health and the natural environment. Project developers benefit from planning certainty for their project once an EIA has been completed. An EIA can significantly delay the permit decision because it includes providing relevant information, presenting it to the public and assessing it by the authorities.

The EIA is part of the permit procedure in German law and not an independent element. Therefore, isolated legal actions against the EIA alone can only be admissible and successful if the disregarded article of the Environmental Impact Assessment Act itself provides enforceable rights.

The key statutes are the Federal Soil Protection Act (Bundesbodenschutzgesetz) and the federal states’ soil protection acts. Contamination risks are evaluated based on threshold values set out, inter alia, by an ordinance complementing the act. According to the act, several persons/entities may be held liable for contamination, all of whom can equally be subject to inspections carried out at their expense or to remedial action orders. In turn, the accountable person/entity may have a compensation claim against the others. Especially in complex investigations and remediation situations, it may be advisable to conclude a contract with the competent authority under public law (öffentlich-rechtlicher Vertrag). Further detailed regulations concerning soil protection are set out in the Federal Soil Protection and Contaminated Sites Ordinance (Bundes-Bodenschutz- und Altlastenverordnung). The Federal Water Act (Wasserhaushaltsgesetz) contains regulations regarding ground water.

If there is sufficient indication of a contaminated site, the authorities may order the person/entity liable under the Soil Protection Act to carry out investigations to assess the relevant hazards (Gefährdungsabschätzung). In case of a site contamination and even after clearance, responsible parties may be obliged to conduct monitoring and investigation measures. Especially in the case of particularly hazardous or widespread contamination, responsible parties may be ordered to conduct an investigation to determine the type and extent of the required remediation measures (Sanierungsuntersuchung) or to submit a remediation plan (Sanierungsplan).

According to the Federal Immission Control Act, a report on the initial status must be submitted to the competent authority in advance, if hazardous substances are used in an industrial activity. If the site is found to be more contaminated than specified in the report, the operator is obliged to restore the site to its previous condition.

Such duties are laid down in the soil protection laws of the federal states. For instance, the State Soil Protection Act of North Rhine-Westphalia (Landesbodenschutzgesetz NRW) requires responsible parties to notify the competent authorities, which are primarily defined on district level. Depending on the specific case, the disclosure obligation may be limited by the privilege against self-incrimination. However, operators must consider that non-disclosure may result in an administrative fine. In addition, environmental contamination is subject to the Environmental Damages Act (Umweltschadensgesetz), which sets out obligations for companies in case of immediate risk of environmental damage or if environmental damage has occurred.

A property owner whose land is contaminated but who did not cause the contamination and who is obliged by the competent authorities to carry out remediation measures has a right to compensation against other responsible parties (if they exist). In cases involving several responsible parties, the Soil Protection Act provides for a compensation claim between the parties. If not otherwise agreed, the obligation to provide such compensation, and the amount of compensation, depends on the extent to which the hazard or damage was caused primarily by one party.

Generally, claims for compensation become time-barred after three years. If the remediation measures were carried out by the authority, the period begins once the authority collects the costs of that remediation; if a private party carried them out, it starts once the claimant becomes aware of the other party’s responsibility. Regardless of such knowledge, claims become time-barred 30 years after the remediation measures were completed.

The regulatory regime for waste is established in the Waste Management Act (Kreislaufwirtschaftsgesetz), which follows the principles of reduce, reuse, recycle and dispose. Waste is defined as substances or objects that the holder disposes of, intends to dispose of, or is required to dispose of. Several ordinances, such as the List of Wastes Ordinance (Abfallverzeichnisverordnung), complement the act. The regulations include strict recycling requirements and rules regarding the separation of waste types and take action against the discarding of returned products by introducing duties of care. Manufacturers may be obliged to draw up a transparency report on the destruction of goods. The EU has and will continue to introduce product or field specific rules, which concern certain types of waste.

Section 22 of the Waste Management Act allows responsible parties to commission a third party to dispose of the waste. However, this does not relieve them of fulfilling their duties of care. The commissioning parties may be held liable under criminal and civil law if the waste has not been disposed of properly by the third party and if they have neglected their responsibility to select the third party with due care.

The Packaging Act (Verpackungsgesetz) obliges manufacturers and distributors to take back returned packaging free of charge and to have it recycled in an environmentally friendly way. The packaging manufacturers and distributors are obliged to participate financially in a waste disposal scheme which must guarantee regular collection from private consumers.

For vehicles, the End-of-Life Vehicles Ordinance (Altfahrzeug-Verordnung) requires manufacturers or importers to take back all vehicles licensed in the EU free of charge and to ensure that they are properly recycled.

Electronic waste as well as batteries and accumulators can be returned to collection points free of charge, as set out in the Battery Act (Batteriegesetz) and the Electrical and Electronic Equipment Act (Elektro- und Elektronikgerätegesetz). Producers, importers, and (under certain circumstances) retailers must take back, recycle, or dispose of such waste according to the WEEE Directive (2012/19/EU) and the Electrical and Electronic Equipment Act.

On 18 February 2024, a new EU Battery Regulation (2023/1542/EU) came into force, which takes into account the life cycle of batteries from production to recycling. As well as covering new battery types, it also introduces new requirements for producers, such as a carbon footprint declaration, higher requirements for battery performance and durability, and labelling requirements for capacity and minimum operating time.

Duties may entail an asbestos survey or drawing up a list of asbestos affected components as a precautionary measure. There is no general obligation to remove asbestos contained in buildings or individual building parts. The competent authorities have the power to issue all orders deemed necessary to protect human health. In addition, the responsible party may incur civil liability for personal injuries based on its duty to protect the public (Verkehrssicherungspflichten).

Some of the most significant product regulations in Germany are directly applicable EU regulations: the REACH Regulation (1907/2006/EC), the CLP Regulation (1272/2008/EC), the POP Regulation (850/2004/EC) on persistent organic pollutants, the Biocidal Products Regulation (528/2012/EU) and the Regulation on F-gases (517/2014/EU).

In 2021, Germany introduced the Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz), obliging companies of a certain size to evaluate the risks for certain human rights violations and damages to the environment in their supply chains, to publish a policy statement and to take measures to prevent or minimize violations. Enforcement fines (Zwangsgeld) up to EUR 50,000 and administration fines (Bußgeld), may follow in case of violations. Additionally, the EU Corporate Sustainability Due Diligence Directive (CSDDD) allows for even stricter measures in this regard (see below under point 13. Updates/Reform).

Other product related regulations in Germany include: the General Product Safety Regulation (2023/988/EU) and the Regulation on Deforestation-Free Products (2023/1115/EU). The Ecodesign for Sustainable Products Regulation (2024/1781/EU) entered into force on 18 July 2024.

Germany has adopted its “Energy Efficiency Strategy 2050” (Energieeffizienzstrategie) in December 2019, which updates the National Action Plan on Energy Efficiency from 2011. It commits to cut primary energy consumption by 30% by 2030 and by 50% by 2050, relative to consumption levels in 2008. Besides promoting targeted investment in energy efficiency and setting up funding programmes to increase energy efficiency in companies, the strategy also imposes binding obligations on large companies to conduct energy audits and establishes new standards for new appliances and newly constructed buildings.

The revised EU Energy Efficiency Directive (2023/1791/EU) sets the goal to collectively ensure an additional 11.7% reduction in energy consumption by 2030 compared to the reference scenario projections of 2020. Binding saving targets have to be fulfilled by the member states over the years up until 2030 and obligations for companies to perform energy audits have to be implemented. Germany has to implement the directive until October 2027.

In Germany, the reduction targets for the upcoming decades have been stated in the Climate Action Programme 2030 and the Climate Change Act (Klimaschutzgesetz). Relevant regulations for achieving the reduction targets are, e.g.:

The Fuel Emissions Trading Act (Brennstoff-Emissionshandelsgesetz) introduced a national emissions trading system for fuels. On the EU-level, the EU emission trading system (EU ETS) is the EU’s key instrument for reducing greenhouse gas emissions from large-scale emitters of certain industries. The EU-ETS 2, a new separate emission trading system, has been installed, covering further industry sectors. For carbon intensive goods that are entering the EU, the Carbon Border Adjustment Mechanism has been created (see below under point 13. Updates/Reform).

Furthermore, the Buildings Energy Act (Gebäudeenergiegesetz) states an abundance of rules to ensure climate-friendly construction, heating, and refurbishment of buildings.

Regarding the increase of the use of renewable energy, the goal is that 80% of gross electricity consumption come from renewable energy sources by 2030. To prioritise the expansion, many new provisions for the generation – planning, construction, financing and use – of renewable energy, like wind or solar energy have been introduced.

Germany aims to become greenhouse gas neutral by 2045. It has set the interim targets of cutting emissions by at least 65% by 2030 compared to 1990 levels, and 88% by 2040.

The EU aims to become greenhouse gas neutral by 2050. It has set out to reduce greenhouse gas emissions by 55%, compared to 1990 levels, by 2030 and achieving a share of renewable energy amounting to at least 42,5%.

In Germany, companies are currently not obliged to draw up or publish a specific plan to reduce emissions. However, there are various legal frameworks and initiatives that encourage companies to integrate and report on climate protection measures.

The Corporate Due Diligence Obligations in Supply Chains Act (Lieferkettensorgfaltspflichtengesetz) requires companies above a certain size to identify and address human rights and environmental risks in their supply chains. Although the law does not explicitly require a climate transition plan, climate-related risks may fall under the concept of environmental pollution, which may encourage companies to include climate change issues in their due diligence obligations.

The EU Corporate Sustainability Reporting Directive (CSRD) obliges companies to expand and improve their sustainability reporting. It builds on the previous EU Non-Financial Reporting Directive (NFRD) but expands the scope of companies addressed and strengthens the reporting requirements. A key aspect of the CSRD is the mandatory introduction of a climate transition plan, particularly for large companies. These plans should set out a company’s strategic direction for the transition to a low-carbon economy and how the company intends to adapt its business activities in line with the climate goals of the Paris Agreement and the EU climate targets. As Germany has not implemented the CSRD into national law on time, these obligations do not yet apply to businesses in Germany. An infringement procedure was initiated against Germany in September 2024.

Such terms have not been legally defined yet. Courts have come up with broad definitions, dealing with lawsuits based on the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb). The EU Green Claims Directive (2024/825/EU) came into force in March 2024 and must be transposed into national law by March 2026.It requires companies to provide credible evidence for their claims so as not to mislead consumers.

Sustainability as a policy priority can be found in the Horizontal Block Exemption Regulations (HBERs), which are two delegated regulations by the EU Commission, that allow certain research and development and specialisation agreements to be exempted from Art. 101 paragraph 1 TFEU. Furthermore, the European Horizontal Guidelines provide guidance on the HBERs, and on how to assess various common types of horizontal cooperation agreements under Article 101 paragraph 1 and 3 TFEU.

The German Constitutional Court’s decision in 2021, in which it stated in a landmark ruling that the Climate Protection Act at the time was not sufficient to reach the climate targets set out by the Paris Agreement, continues to be one of the most significant decisions on climate change in recent years. The legislator responded by moving up the “net-zero” goal from 2050 to 2045 and further stepping up the targets for emission cuts.

“Climate lawsuits” in Germany against the state, as well as against private companies, continue to be of increasing importance. They include complaints to refrain from emissions intense behaviour or promotion of products as “climate-neutral”.

On 24 January 2022, a group of young Germans, supported by the environmental organisation Deutsche Umwelthilfe (DUH), filed a constitutional complaint against the revised Federal Climate Protection Act (KSG). They claim that the updated targets for reducing greenhouse gas emissions do not comply with Germany’s constitutional and international obligations. This constitutional complaint is currently pending.

On 12 October and 8 November 2023, the Higher Regional Courts in Munich and Stuttgart confirmed the lower courts’ decisions to dismiss climate-related lawsuits by the German NGO Deutsche Umwelthilfe (DUH) against two German car manufacturers. These cases are part of a wider effort, involving four cases in Germany, to force companies to reduce their climate impact through court orders. The other two cases, one by Greenpeace Germany against a car manufacturer and another by DUH against a gas and oil company, are still pending.

The EU and Germany both have set out high ambitions to become climate-neutral in the near future. Especially due to the ongoing adoption of new EU legislation in accordance with the EU Green Deal and the “Fit-for 55” package, it is inevitable that further substantial legislative changes will follow on the national level in Germany.

The most important liability rules are set out in public law provisions and laid down in various statutes, ordinances and administrative regulations. The German Civil Code (Bürgerliches Gesetzbuch) provides for private claims for compensation, and indemnity claims in respect to environmental damage. Other relevant rules are laid down in e.g. the state’s general police laws (Polizei- und Ordnungsrecht), Environmental Liability Act (Umwelthaftungsgesetz) and the German Criminal Code (Strafgesetzbuch).

1. Liability of the company itself: As the polluter/owner/occupier of an installation or site, a company bears full liability under public and civil law. Irrespective of any fines imposed on individual company personnel, the competent public authorities may fine the company itself. Such fines for administrative offences are generally enforced by the administrative authorities at the state level.
2. Liability of the company’s shareholders: The shareholders’ liability depends on the legal form of the company. Whereas shareholders of a non-incorporated partnership may be held liable, shareholders of a limited liability corporation generally cannot be held liable, unless they are personally responsible for the damage.
3. Liability of the company’s directors: There is no specific precedent set by German civil courts regarding the personal liability of company directors for environmental wrongdoing. The matter is subject to ongoing legal discussion. However, administrative authorities may fine senior company personnel under certain circumstances.
4. Liability of the parent company: The Soil Protection Act clarifies that an entity which is responsible for its subsidiaries/affiliates under general principles of corporate law may be held liable for contaminated land owned by its subsidiary. Under certain circumstances, the general rule to separate the company as a legal entity from its parent company may be disregarded, thus leading to liability of the parent company.
5. Liability of lenders: The concept of lender-liability, under which a creditor is responsible for environmental damage caused by the borrower, does not exist in German environmental law. Nonetheless, environmental risks usually do play a part in a bank’s assessment of the credit rating of a business. They may also factor into the ESG reporting of the lender itself.
6. Other entities: Other entities, such as business partners, consultants, or suppliers, may be held liable, at least under private law, for damages, depending on their involvement in environmental violations or the company’s contribution to the pollution.

The extent of liability depends on the transaction structure and the specific risk allocations included in the sale and purchase agreement (SPA). However, the environmental liabilities set out by public law and addressed by the competent authorities often oblige both parties.

(a) Buyer’s assumption of liabilities: In an asset sale, the buyer generally acquires the environmental liabilities with the acquired asset. Under the Federal Soil Protection Act (Bundesbodenschutzgesetz), the buyer can be held liable for contaminations, even if they occurred prior to the acquisition. Public authorities may hold the buyer directly accountable, regardless of any contractual indemnities provided by the seller. In a share sale, the transaction involves the transfer of a company’s shares, leaving the legal entity itself unchanged. Consequently, all environmental liabilities remain with the company. The buyer indirectly assumes responsibility for these environmental liabilities by taking control of the company.

(b) Seller’s retention of liabilities: In an asset sale, the seller may retain certain liabilities if they are not explicitly transferred. In addition, the seller may remain liable for past contamination if he was responsible for it. In a share sale, environmental liabilities will generally remain with the company, as only the shares are transferred, leaving the legal entity unchanged. The seller is generally released from direct liability unless the SPA includes specific provisions, such as warranties or indemnities, that hold the seller accountable for certain environmental risks. These clauses aim to protect the buyer from undisclosed liabilities or false representations made by the seller.

If the seller fails to inform the buyer about any existing or suspected contamination, the buyer may be able to claim compensation. Unless expressly agreed otherwise, the seller is liable for any defect relating to the sold property, unless the buyer has been made aware of such defect, meaning any known dangerous contamination under the Soil Protection Act. The buyer can either rescind the contract or reduce the purchase price accordingly. A claim for compensation may also be applicable. Generally, the buyer must assert these rights within two years.

Since the environmental liability laws are not consolidated and stipulate various offences across different acts, a great variety of insurance types exist, depending on the committed offence and the costs. Insurance cover will not be granted if the environmental damage has been caused by the normal operation of an installation, unless the insured party proves that it could not reasonably have been expected to recognise the possibility of such damage, given the state of technology at the time of the effect on the environment. Only in more recent times, a few larger international insurance companies have begun to offer environmental liability policies to fill this gap.

Public access to environmental information in Germany is regulated in the Environmental Information Act (Umweltinformationsgesetz) and corresponding acts by the states. Any environmental information recorded by federal authorities falls within the scope of the act and it obliges all federal authorities to disclose environmental information to all citizens who wish to receive information. Public registers only exist in certain areas.

The Corporate Sustainability Reporting Directive (2022/2464/EU, CSRD) requires companies to provide comprehensive and detailed disclosure of their sustainability performance, expanding the rules of the Non-Financial Reporting Directive (2014/95/EU). The content of the report is specified by the European Sustainability Reporting Standards (ESRS), in force since 2024. On 24 July 2024, the Cabinet approved the draft CSRD Implementation Act, which implements the CSRD into German law. Although the time limit for implementing the directive was in July 2024, Germany, like other EU states, failed to meet the implementation deadline.

At the federal-level, information must be disclosed to the public in accordance with the Environmental Information Act. Access to environment-related information at the state and municipality level falls within the legislative competence of the federal states, which have all adopted similar legislation. Access to environmental information may be denied to protect certain public and private interests.

Companies in Germany are required to publicly report on greenhouse gas emissions, particularly if they meet certain size criteria. The legal requirements are based on the EU Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (CSRD). The CSRD integrates the European Sustainability Reporting Standards (ESRS), which provide specific guidance on greenhouse gas reporting. These requirements apply progressively.

Companies that meet certain criteria (size in terms of total assets, net sales, or number of employees) are required to report on their environmental, social and governance (ESG) performance, including their impact on the climate change and greenhouse gas emissions. The reporting requirement includes the disclosure of information on greenhouse gas emissions and actions taken to reduce them. Companies must be transparent about how they are addressing the risks and opportunities of climate change. The CSRD has further strengthened sustainability reporting requirements and extended them to a larger number of companies by requiring more companies to publish detailed and standardised sustainability information. However, this directive has not yet been implemented into German law.

Amendments to energy legislation

On 11 December 2024, the Cabinet approved amendments to the Renewable Energy Sources Act (EEG 2023) relating to bioenergy. The German Federal Ministry for Economics and Climate Protection (Bundesministerium für Wirtschaft und Klimaschutz) presented a comprehensive biomass package, which in particular improves the future prospects for biogas plants connected to heating networks and emphasises system-oriented flexibility for subsequent funding. These regulations are designed to provide stronger incentives for making biogas plants to become more adaptable. Overall, this will reduce costs compared to the current situation and ease the burden on the EEG account in the future.

In addition, sustainable biomass is a scarce and valuable resource that needs to be used wisely. In the electricity sector, this means that biomass should maximise its potential for flexible use and complement wind and solar power. As a result, the industry is advocating the creation of a tailored framework that promotes system-beneficial flexibility.

Draft law on Combined Heat and Power Act (Kraft-Wärme-Kopplungsgesetz)

A draft law on the Combined Heat and Power Act (CHP Act) has been passed. Previously, CHP plants had to be commissioned by 31 December 2026. Due to the change in the starting point for eligibility, only a certain planning status of the plants, e.g. a federal emission control permit, is required by this date. This means that new or modernised CHP plants can be commissioned much later than 31 December 2026 and still receive support under the Combined Heat and Power Act. The same applies to heating networks and heat storage facilities that receive support under the Combined Heat and Power Act.

The draft law gives the stakeholders legal and planning certainty beyond 2026, as it effectively extends the funding effect of the Combined Heat and Power Act. At the same time, no prior commitments are made for a later capacity mechanism.

Climate protection through modern heating systems

With the Renewable Heating Act (Gebäudeenergiegesetz), the German government is promoting the transition to eco-friendly heating systems. The law requires that by mid-2028, all new heating systems must use at least 65% renewable energy. The government provides subsidies for the necessary replacement of heating systems. The federal government offers financial support to citizens who upgrade their heating systems to meet the 65% renewable energy requirement, covering up to 70% of the costs.

Construction and operation of renewable energy plants in overriding public interest

The expansion of renewable energies has been privileged in Section 2 of the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz 2023), stipulating that the construction and operation of renewable energy plants is in the overriding public interest and is serving public safety. Until electricity generation in Germany is almost greenhouse gas-neutral, renewable energies are to be given priority in the consideration of protected interests to be carried out in each case. For example, when considering landscape protection regulations, renewable energy plants may be granted priority.

EU Corporate Sustainability Due Diligence Directive (CSDDD)

In July 2024, the EU Corporate Sustainability Due Diligence Directive (CSDDD) came into force, which aims to promote sustainable and responsible business practices both within companies and along their global value chains. It sets obligations for EU and non-EU companies of a certain size regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners. The CSDDD applies to EU companies with more than 1,000 employees and an annual net turnover exceeding EUR 450 million, as well as to foreign companies that generate this turnover in the EU. Implementation will take place in three stages. Three years after the Directive enters into force, it will apply to EU companies with more than 5,000 employees and a worldwide net turnover of more than EUR 1.5 billion, as well as to non-EU companies with corresponding turnover in the EU. Four years after the adoption of the Directive, it will be extended to EU companies with more than 3,000 employees and a turnover of more than EUR 900 million, or to foreign companies meeting the same criteria. Five years after the implementation, the Directive will cover all companies meeting the initial thresholds. Financial services will be temporarily excluded from the scope. Pecuniary penalties may amount to up to 5% of the company’s net turnover. Compliance with the CSDDD may also be qualified as a criterion for the award of public contracts and concessions. Germany has until July 2026 to implement the Directive into national law. The rules will apply to companies from July 2027, with a phased-in approach.

Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) ensures that a price is put on the carbon emitted during the production of carbon intensive goods that are entering the EU. It applies to cement, iron, steel, aluminum, fertilisers, electricity and hydrogen. On 1 October 2023, the CBAM entered its transitional phase, with the first reporting period for importers ending on 31 January 2024. The permanent system will enter into force in 2026. Each year, importers will need to declare the quantity of goods imported into the EU in the preceding year and their embedded greenhouse gases. According to those numbers, they will be obliged to buy the corresponding amount of CBAM certificates.