Germany’s climate U-turn is the worst possible response to the oil shock | Tania Roettger
TThe car is perhaps the closest thing to a national symbol in Germany. It is for this reason that the success of the automobile industry and the happiness of motorists have long been a barometer of the reputation of the Federal Republic.
Since the start of the war against Iran, German news has been full of stories about drivers. Reporters carried breathless dispatches from gas stations across the country, reporting scenes of anger and frustration over rising fuel prices.
The anger is understandable. Diesel briefly rose to more than €2.40 (£2.08) a liter, an increase of more than 50% on the price a year ago.
Because the effects of the war were quickly felt in the form of inflation, the Strait of Hormuz crisis revealed how fragile the European economy is – although it is not the first time that Europeans have been forced to learn the lesson of their energy dependence. Between 2020 and 2024, Covid, the blockage of the Suez Canal by the Ever Given container ship, Russia’s war against Ukraine and Israel’s war against Gaza have all disrupted global trade and the EU’s energy security.
These previous crises should have taught the German government how to react politically to such shocks. But its reaction to the US-Israeli war against Iran once again exposed the hypocrisy of Germany’s energy policy. Friedrich Merz’s governing coalition of the Christian Democratic Union (CDU), Christian Social Union (CSU) and Social Democrats (SPD) has responded to the latest disruptions to oil shipments by doubling down on its commitment to fossil fuels. This has taken the form of new subsidies for fossil fuels and the development of new laws that could halt funding for renewable energy projects.
On March 23, Katherina Reiche, Germany’s Minister of Economy and Energy, gave a remarkable speech at an energy conference in Houston, Texas, in which she questioned the European law that sets the goal of net zero emissions by 2050. “There is a flexibility that we need to regain,” she said, adding that this could only be achieved by “allowing different solutions and technologies” and accepting that this could mean that the EU could miss its net zero emissions target within “maybe 5 or 5 years”. 10% by 2050.”
This apparent reversal of renewable energy was not inevitable. Shortly after the start of the war against Iran, the President of the European Commission, Ursula von der Leyen (herself a member of the CDU and a long-serving minister under Angela Merkel), argued for a green transition that could not have been further from Reiche’s declaration two weeks later. “Ten days of war have already cost European taxpayers an additional 3 billion euros in fossil fuel imports,” von der Leyen told the European Parliament in Strasbourg. “This is the price of our dependence. The fact is that we have energy sources that are local: renewable energies and nuclear power. Their prices have remained the same over the last 10 days.”
At the root of this divide between Brussels and Berlin is the CDU and CSU’s systematic disregard for tackling the climate crisis, expressed most vehemently by Reiche. Before taking up his ministerial post, Reiche was CEO of Westenergie AG, a subsidiary of the energy company E.ON.
His journey has drawn strong criticism from those who view the energy minister as too close to the fossil fuel industry, which has its own interests. She seemingly proved her critics right this month, when she opposed a proposed SPD plan to tax oil companies’ excess profits.
Environmental groups became even more alarmed when Reiche announced she would stop construction of wind and solar farms and eliminate programs subsidizing private solar modules. In their place, she proposed building new gas plants. In November, Reiche justified his political mission in the name of efficiency. “Subsidies and public funding programs must in turn be rigorously scrutinized,” she said. “Bad incentives must be dismantled, even if it hurts. » She alluded to the reduction in subsidies for the installation of heat pumps, announced by her Green Party predecessor.
Before the war in Iran, Reiche had promised that she would let the market dictate her policies, not the other way around. But it simply created an exception for the fossil fuel industry. For example, she wanted to increase subsidies that would disproportionately benefit motorists who need their cars to get to work. In the end, the government agreed to introduce an equally circuitous subsidy: a reduction in taxes on fuel sold at gas stations. This will be costly and will effectively amount to a transfer of public funds to businesses, to the detriment of Germans who will not need to refuel their cars.
The current crisis – the biggest oil shock in decades – has shown that fossil fuels are neither economical nor environmentally sustainable. Subsidies should therefore be used to develop renewable energies. But the CDU-led government is doing exactly the opposite.
The war proved that when the interests of motorists are at stake in Germany, the free market ideology disappears. In late March, a law limiting gas stations to no more than one price increase per day was quickly drafted and passed.
In an ideal world, the government would extend the sympathy it offers motorists by widening the network of relief programs. But when it comes to who is worth spending money on, hypocrisy seems to prevail.
