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Renewables may profit from chaos in Germany's coalition

Social Democrats back new party leaders who threatened to leave the government unless climate policies are boosted

Just in time for the COP25 climate conference that started in Madrid on Monday, Germany’s climate policy is in disarray – as is Chancellor Angela Merkel’s left-right governing coalition.

Members of the Social Democrats (SPD), the minor partner ruling Germany with Merkel’s conservatives (CDU/CSU), in a party referendum voted for a duo of two sceptics over the so-called ‘grand coalition’ as its new party leaders.

The outcome was unexpected, as the winners – Norbert Walter-Borjans, a former state minister in North-Rhine Westphalia, and Saskia Esken, a little-known member of parliament – beat a rival partnership of powerful finance minister and vice chancellor Olaf Scholz, and his running mate Klara Geywitz.

The new dual party leadership during the race for the SPD top spots had indicated it will recommend an end to the coalition with the CDU/CSU, if Merkel’s Christian Democrats won’t re-negotiate a series of policies, among them the recently approved climate package that is considered too unambitious by great parts of the SPD.

The SPD at its party convention that starts this coming Friday still needs to formally approve Walter-Borjans and Esken as new leaders. Meanwhile, several heavyweights in the CDU have already rejected their calls for a renegotiation of the coalition deal.

If the new SPD leaderships gets its way, the renewables sector may profit if a faster route to a decarbonisation of Europe’s largest economy is the outcome.

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But if the CDU/CSU doesn’t budge, Walter-Borjans and Esken may wreck Merkel’s coalition, with the result likely being a Merkel minority government for a short while followed by fresh elections early next year.

It is unclear how both parties will act next in the standoff as both the CDU/CSU and the SPD are likely to shed votes in the case of a new election, although the SPD has more to lose.

Opinion polls released over the weekend show the SPD at a meagre 13 to 15% (down from an already disastrous 20.5% in the last election in 2017), the CDU/CSU at 27-28% (down from 32.9%), and the Greens at 20-23% (up from 8.9%).

That means the only stable government coalition after new elections would be between the conservatives of the CDU/CSU and the Greens.

The crux (at least for the CDU/CSU) is that the Greens are even less likely than the SPD to accept the lacklustre climate package that foresees an exit from coal only in 2038, and a carbon price for heating and fuels that would start at an unimpressive €10 per ton of CO2.

The Greens have already demanded an early coal exit in 2030, an initial CO2 price of at least €40/MWh, and a scrapping of a planned 1km minimum distance rule for new wind projects.

While Merkel herself has admitted that she could imagine a more ambitious climate policy, she has resigned to “what is possible” during the climate-package debate as heavyweights in her party put on the brakes. Among them was the powerful state premier of North-Rhine Westphalia, Armin Laschet, who is also seen as vying for the chancellorship.

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Merkel’s favourite in the race to succeed her, CDU party leader Anngret Kramp-Karrenbauer, is herself a party conservative with moderate climate ambitions. AKK, as she is widely called, also currently is too weak within her party to push through demands against the more right-wing sceptics of wind power on land, who also reject a faster coal exit.

Merkel herself has said she won’t run again in case of new elections, which leaves politicians such as Laschet with more power.

On the other hand, without the Greens the CDU/CSU would have no possible majority after fresh elections as the SPD has worn itself out in the coalition, and the liberal Free Democrats (FDP) will likely come out too weak. At the same time, all parties have ruled out a coalition with the far-right Alternative for Germany (AfD) that may become third-strongest party, overtaking the SPD.

Either way, the CDU/CSU may need to budge on climate issues, or risk a constitutional crisis.

At the Madrid summit, environment minister Svenja Schulze of the SPD has the unpleasant task of defending Germany’s feeble climate package that much of her party rejects, helped by another round of Fridays for Future teenage climate protests that brought some 50,000 people to the streets of Berlin last Friday.

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