In the first real working week of the new year, we take another look back at 2024: Malte Kreutzfeldt takes stock of the German government’s climate policy – and surprisingly, it turns out better than one might expect based on many reports.
As of Jan. 1, entrepreneurs in Italy must insure themselves against natural disasters. Kai Schöneberg explains how Germany could also make a new attempt to introduce compulsory insurance against natural disasters after the general election.
In an opinion piece, Felix Creutzig from MCC Berlin also explains why the softening of the CO2 limits is not only harmful to the German car industry, but also to motorists.
Additionally, we report on how Joe Biden is protecting US waters from future oil and gas extraction shortly before the end of his term of office. We also look at the British electricity mix and report on an open letter for more consistent climate reporting in the German parliamentary election campaign.
Stay tuned with us in 2025!
Rising losses due to increasing extreme weather are also increasing the pressure on insurance companies, households, and businesses. Without effective climate action, the insurance industry expects insurance premiums to double in ten years. From Jan. 1, 2025, all companies in Italy will therefore have to be insured against natural disasters. Similar regulations already exist in Europe: in France, the UK, and Switzerland. In the USA, more and more insurers are withdrawing from areas such as coastal regions that are threatened by climate change.
In Germany, too, a possible CDU-led federal government is bringing compulsory insurance against “natural hazards” closer, as the CDU/CSU wants to finally implement its idea of compulsory insurance against natural hazards for homeowners after the federal elections. “We haven’t shelved our thoughts on this,” said CDU MP Carsten Müller to Table.Briefings. In the autumn of 2023, the chairman of the Bundestag’s Legal Affairs Committee took the lead in introducing a motion from his parliamentary group in the Bundestag, which was rejected by the members of the traffic light party.
However, all federal states and Chancellor Scholz were in favor of this in the summer. Now the political situation has changed. It is unclear whether the opponents of compulsory insurance from the FDP will even enter parliament again. In any case, the CDU/CSU has included its concept in its election manifesto. And the SPD, a possible coalition partner, has signaled its approval.
There is a reason for this: Mud floods in Spain in October, torrential floods in Poland, the Czech Republic, Austria and Romania in September, flooding in Belgium, eastern France and south-western Germany in May: climate change has led to a sharp increase in damage caused by extreme weather in recent years. According to the NGO network Insure Our Future, 38% of the weather-related damage compensated by insurers worldwide each year, amounting to around USD 30 billion, was caused by climate change – seven percentage points more than ten years ago. According to the European Environment Agency, the amount of climate change-related damage in Europe increased by an average of 2.9% per year between 2009 and 2023.
Italy is therefore now introducing compulsory insurance for natural disasters for companies. The state is setting up a reinsurance fund backed by five billion euros, and uninsured bosses face penalties. The decree issued by the right-wing government in September is a consequence of the floods in the Po Valley. A similar regulation has been in place for property owners in France since the 1980s. Switzerland has compulsory insurance for everyone, while in the UK a state-backed reinsurance scheme provides cheap flood insurance.
The idea behind natural hazard insurance: To prevent individuals from being driven into bankruptcy or the state having to pay for the immense costs, all property owners should have to take out insurance. Currently, only 54 percent of properties in Germany are insured against natural hazards – over 90 percent in Baden-Württemberg, where insurance was compulsory until the 1990s, but only just over 30 percent in Lower Saxony or Bremen.
So-called floods of the century are occurring more and more frequently due to climate change: In 2002 on the Elbe, Danube, and Saale, in 2013 in large parts of southern, central, and northern Germany, and in 2021 in the Ahr valley. At a cost of €40.5 billion, this flood was the extreme weather event with the greatest damage in German history. However, insurance companies only paid €8.5 billion of this, while the federal, state and local governments shouldered €30 billion.
Reinsurers, on the other hand, are opposing the proposal: “We are against compulsory insurance, as it typically does not involve risk-adequate prices,” emphasizes Munich Re. The world’s largest reinsurer argues as follows: Only a high premium due to a high risk of damage would mean a high incentive to arm oneself against extreme weather damage. In fact, around 1,000 new residential buildings are still being built in flood-risk areas every year.
The SPD, possibly a coalition partner of the CDU/CSU after the election, is also in favor of compulsory basic insurance. “We have to stop the state constantly stepping in,” says SPD member of parliament Johannes Fechner. He envisions a model à la française: solidarity-based instead of risk-based, plus a state-guaranteed reinsurance system.
There are still differences between the SPD and CDU on the details. CDU member Müller criticizes the “egalitarianism” in the SPD’s concept and points to the problems in France: “The costs here will rise from €26 to €42 euros per month in 2025, and in France, of all places, floods are not covered,” says the parliamentarian.
Müller wants to make it mandatory for new residential building insurance policies to include a natural hazard clause in the future – although this could be suspended. All existing contracts are also to be automatically switched to natural hazard insurance on a certain date. However, after being informed of the consequences, this can be opted out of. This reduces the burden on the state, Müller emphasizes: “Those who opt out can of course not expect any state aid afterwards.”
However, it is clear to all those involved that compulsory insurance can only be one part of the measures, as it does not prevent climate damage. Building bans in risk zones, building materials that can withstand flooding, and risk assessments for building permits are also being debated. And, of course, more flood protection and prevention. The German Insurance Association writes: “We expect that without consistent prevention, premiums will double in the next ten years due to climate change alone.”
The German government’s climate action record is better than many reports suggest: CO2 emissions decreased by another three percent in 2024, reaching 656 million tons. This figure significantly undercuts the 2024 target of 693 million tons set by the Climate Protection Act. These findings come from the annual report by the think tank Agora Energiewende, set to be released on Tuesday and seen in advance by Table.Briefings.
While emissions dropped by a more dramatic 10 percent in 2023, that decline was primarily due to reduced production in energy-intensive industries. By contrast, last year’s decline had a less problematic cause: a significant shift in power generation. Coal-fired power generation fell by 16 percent to a historic low of 105 terawatt-hours. Meanwhile, renewable energy generation increased by four percent to a record 285 terawatt-hours – despite below-average wind conditions in 2024. “This reflects the impact of coal capacity shutdowns and the rapid expansion of solar energy,” Agora Director Simon Müller told Table.Briefings.
Part of the displaced coal power was replaced by electricity imports, which accounted for about five percent of Germany’s total consumption in 2024. These imports do not affect Germany’s climate balance, as emissions are always attributed to the producing country. However, on a European level, the imports lead to lower CO2 emissions. According to Agora’s calculations, about half of the imported electricity came from renewable sources, and a quarter was generated by nuclear power. As a result, the imported electricity had an even lower CO2 footprint than Germany’s own energy mix, whose CO2 intensity dropped to 293 grams per kilowatt-hour in 2024.
The developments in other sectors are less encouraging:
While Agora Director Simon Müller views the achievement of the 2024 climate target derived from the Climate Protection Act as positive, he warns against complacency. The stagnation in the building and transport sectors puts Germany at risk of failing to meet the binding targets of the EU’s Effort Sharing Regulation. This could force the government to purchase emissions allowances from other EU member states or face penalty payments, Müller explained, representing a significant fiscal risk potentially costing billions.
Additionally, Germany’s medium- and long-term climate goals are jeopardized, Müller warned. The shortfall in heat pumps and electric vehicles will become harder to close with each passing year. To meet these goals, decisive and reliable political action is crucial. In the building sector, this means upholding the Building Energy Act, which mandates that new heating systems must use at least 65 percent renewable energy. This creates trust and investment security, even for the heating industry, which has already massively expanded its production capacity for heat pumps.
In the transport sector, the transition to e-mobility must continue to be pursued rigorously. Betting on climate-neutral fuels for vehicles and heating systems, however, would be counterproductive. This would exponentially increase demand for renewable electricity and drive up costs, Müller emphasized.
Europe is at a crossroads: While European regulation is tightening the CO2 limits for new cars next year as planned, the German car industry is struggling to remain competitive. Cheap electric vehicles from China are putting pressure on the market, while ambitious emissions targets are set to accelerate the transformation of the industry – with uncertain consequences for jobs and innovation. In this situation, Volkswagen and Mercedes – unlike BWM or Opel – are pushing to soften the upcoming CO2 limits.
However, softening the CO2 fleet limits in the EU from 2025 would be a serious strategic mistake that would damage the German automotive industry in the long term. Instead of focusing on the future markets of electromobility, such a decision would chain the industry to the past – in a shrinking market for combustion engines.
The future market is clear: electric vehicles. They are already on the way to becoming competitive in terms of production costs. Thanks to falling battery costs, they will be cheaper than combustion engines by the end of this decade at the latest. This development is being accelerated by technological advances, economies of scale and massive investment in the charging infrastructure. At the same time, the operating costs of combustion engines are increasing due to rising energy prices, CO2 levies and higher maintenance costs.
The transition to electromobility is not only inevitable but also economically indispensable for an industry that wants to remain globally competitive. A strategy that continues to rely on combustion engines ignores this dynamic and ties up resources in an outdated concept.
Currently, newly registered cars may not emit more than 115.1 grams of CO2 per kilometer on average in the EU. In 2025, this limit would fall to 93.6 grams. Softening the CO2 limits would mean passing on the costs to consumers. How is that possible?
Lower CO2 fleet limits would slow down the sale of electric vehicles, as the pressure on manufacturers to offer zero-emission vehicles would decrease. This would have immediate consequences: In three years’ time, there would be more vehicles with combustion engines on the roads, which would increase CO2 emissions. These additional emissions would be reflected in the ETS-II emissions trading system, which will also cover the transport sector in the future. Higher emissions lead to a shortage of certificates and therefore to rising prices. These additional costs will be passed on directly to consumers in the form of higher gas and diesel prices at the gas station. The strategy of the Brussels lobbyists therefore amounts to shifting the costs of the transformation from the automotive industry to the public, while at the same time delaying the urgently needed reduction in emissions.
However, a flexibility option that allows the fleet limits to be exceeded in 2025 and in turn overcompensates for the fleet limits for 2026 would have virtually no impact on the ETS II CO2 prices in the following years. In these years, the same amount of CO2 emissions would be generated in the transport sector with or without the flexibility option. In this respect, a flexibility option limited to 2025 and 2026 would be acceptable.
The assumption that the existing CO2 limits for 2025 would result in billions being paid out to the German car industry per se should be treated with caution. Rather, the limits create incentives to push more EVs onto the market at a discount and to offer combustion engines without a discount: a desired effect in order to achieve the fleet limits, avoid fines, and take an important step towards achieving climate targets.
The argument that the softening of fleet limits is necessary to ensure “technological openness” also turns out to be a smokescreen on closer inspection. The aim behind this buzzword is often to keep the combustion engine artificially alive. While hydrogen and e-fuels are propagated as alternatives for propulsion, these technologies are neither sufficiently available nor economically suitable for widespread use in passenger cars.
The cost of producing e-fuels is disproportionately high and the energy loss during their production and use is enormous. Biofuels, on the other hand, are hardly sustainable in large quantities. In fact, these “alternative technologies” are often just a pretext for delaying the transition to electromobility and protecting fossil fuel business models.
The German automotive industry has the opportunity to secure its global leadership position by consistently focusing on electromobility. Competitors from China and the USA are investing massively in electric vehicles and already dominate key markets. Those who now rely on a stagnating past market risk being left behind in global competition. Instead of softening the limits, the EU should stringently maintain its fleet limits and thus set the course for sustainable, future-proof mobility. This is not only good for the climate, but also crucial for the long-term competitiveness of the German automotive industry.
Prof. Dr. Felix Creutzig heads the Land Use, Infrastructure and Transport working group at the Mercator Research Institute on Global Commons and Climate Change (MCC Berlin). He is Bennett Chair for Innovation and Policy Innovation at the University of Sussex and is a member of the Expert Advisory Board on Climate Protection in Mobility.
In the first real working week of the new year, we take another look back at 2024: Malte Kreutzfeldt takes stock of the German government’s climate policy – and surprisingly, it turns out better than one might expect based on many reports.
As of Jan. 1, entrepreneurs in Italy must insure themselves against natural disasters. Kai Schöneberg explains how Germany could also make a new attempt to introduce compulsory insurance against natural disasters after the general election.
In an opinion piece, Felix Creutzig from MCC Berlin also explains why the softening of the CO2 limits is not only harmful to the German car industry, but also to motorists.
Additionally, we report on how Joe Biden is protecting US waters from future oil and gas extraction shortly before the end of his term of office. We also look at the British electricity mix and report on an open letter for more consistent climate reporting in the German parliamentary election campaign.
Stay tuned with us in 2025!
Rising losses due to increasing extreme weather are also increasing the pressure on insurance companies, households, and businesses. Without effective climate action, the insurance industry expects insurance premiums to double in ten years. From Jan. 1, 2025, all companies in Italy will therefore have to be insured against natural disasters. Similar regulations already exist in Europe: in France, the UK, and Switzerland. In the USA, more and more insurers are withdrawing from areas such as coastal regions that are threatened by climate change.
In Germany, too, a possible CDU-led federal government is bringing compulsory insurance against “natural hazards” closer, as the CDU/CSU wants to finally implement its idea of compulsory insurance against natural hazards for homeowners after the federal elections. “We haven’t shelved our thoughts on this,” said CDU MP Carsten Müller to Table.Briefings. In the autumn of 2023, the chairman of the Bundestag’s Legal Affairs Committee took the lead in introducing a motion from his parliamentary group in the Bundestag, which was rejected by the members of the traffic light party.
However, all federal states and Chancellor Scholz were in favor of this in the summer. Now the political situation has changed. It is unclear whether the opponents of compulsory insurance from the FDP will even enter parliament again. In any case, the CDU/CSU has included its concept in its election manifesto. And the SPD, a possible coalition partner, has signaled its approval.
There is a reason for this: Mud floods in Spain in October, torrential floods in Poland, the Czech Republic, Austria and Romania in September, flooding in Belgium, eastern France and south-western Germany in May: climate change has led to a sharp increase in damage caused by extreme weather in recent years. According to the NGO network Insure Our Future, 38% of the weather-related damage compensated by insurers worldwide each year, amounting to around USD 30 billion, was caused by climate change – seven percentage points more than ten years ago. According to the European Environment Agency, the amount of climate change-related damage in Europe increased by an average of 2.9% per year between 2009 and 2023.
Italy is therefore now introducing compulsory insurance for natural disasters for companies. The state is setting up a reinsurance fund backed by five billion euros, and uninsured bosses face penalties. The decree issued by the right-wing government in September is a consequence of the floods in the Po Valley. A similar regulation has been in place for property owners in France since the 1980s. Switzerland has compulsory insurance for everyone, while in the UK a state-backed reinsurance scheme provides cheap flood insurance.
The idea behind natural hazard insurance: To prevent individuals from being driven into bankruptcy or the state having to pay for the immense costs, all property owners should have to take out insurance. Currently, only 54 percent of properties in Germany are insured against natural hazards – over 90 percent in Baden-Württemberg, where insurance was compulsory until the 1990s, but only just over 30 percent in Lower Saxony or Bremen.
So-called floods of the century are occurring more and more frequently due to climate change: In 2002 on the Elbe, Danube, and Saale, in 2013 in large parts of southern, central, and northern Germany, and in 2021 in the Ahr valley. At a cost of €40.5 billion, this flood was the extreme weather event with the greatest damage in German history. However, insurance companies only paid €8.5 billion of this, while the federal, state and local governments shouldered €30 billion.
Reinsurers, on the other hand, are opposing the proposal: “We are against compulsory insurance, as it typically does not involve risk-adequate prices,” emphasizes Munich Re. The world’s largest reinsurer argues as follows: Only a high premium due to a high risk of damage would mean a high incentive to arm oneself against extreme weather damage. In fact, around 1,000 new residential buildings are still being built in flood-risk areas every year.
The SPD, possibly a coalition partner of the CDU/CSU after the election, is also in favor of compulsory basic insurance. “We have to stop the state constantly stepping in,” says SPD member of parliament Johannes Fechner. He envisions a model à la française: solidarity-based instead of risk-based, plus a state-guaranteed reinsurance system.
There are still differences between the SPD and CDU on the details. CDU member Müller criticizes the “egalitarianism” in the SPD’s concept and points to the problems in France: “The costs here will rise from €26 to €42 euros per month in 2025, and in France, of all places, floods are not covered,” says the parliamentarian.
Müller wants to make it mandatory for new residential building insurance policies to include a natural hazard clause in the future – although this could be suspended. All existing contracts are also to be automatically switched to natural hazard insurance on a certain date. However, after being informed of the consequences, this can be opted out of. This reduces the burden on the state, Müller emphasizes: “Those who opt out can of course not expect any state aid afterwards.”
However, it is clear to all those involved that compulsory insurance can only be one part of the measures, as it does not prevent climate damage. Building bans in risk zones, building materials that can withstand flooding, and risk assessments for building permits are also being debated. And, of course, more flood protection and prevention. The German Insurance Association writes: “We expect that without consistent prevention, premiums will double in the next ten years due to climate change alone.”
The German government’s climate action record is better than many reports suggest: CO2 emissions decreased by another three percent in 2024, reaching 656 million tons. This figure significantly undercuts the 2024 target of 693 million tons set by the Climate Protection Act. These findings come from the annual report by the think tank Agora Energiewende, set to be released on Tuesday and seen in advance by Table.Briefings.
While emissions dropped by a more dramatic 10 percent in 2023, that decline was primarily due to reduced production in energy-intensive industries. By contrast, last year’s decline had a less problematic cause: a significant shift in power generation. Coal-fired power generation fell by 16 percent to a historic low of 105 terawatt-hours. Meanwhile, renewable energy generation increased by four percent to a record 285 terawatt-hours – despite below-average wind conditions in 2024. “This reflects the impact of coal capacity shutdowns and the rapid expansion of solar energy,” Agora Director Simon Müller told Table.Briefings.
Part of the displaced coal power was replaced by electricity imports, which accounted for about five percent of Germany’s total consumption in 2024. These imports do not affect Germany’s climate balance, as emissions are always attributed to the producing country. However, on a European level, the imports lead to lower CO2 emissions. According to Agora’s calculations, about half of the imported electricity came from renewable sources, and a quarter was generated by nuclear power. As a result, the imported electricity had an even lower CO2 footprint than Germany’s own energy mix, whose CO2 intensity dropped to 293 grams per kilowatt-hour in 2024.
The developments in other sectors are less encouraging:
While Agora Director Simon Müller views the achievement of the 2024 climate target derived from the Climate Protection Act as positive, he warns against complacency. The stagnation in the building and transport sectors puts Germany at risk of failing to meet the binding targets of the EU’s Effort Sharing Regulation. This could force the government to purchase emissions allowances from other EU member states or face penalty payments, Müller explained, representing a significant fiscal risk potentially costing billions.
Additionally, Germany’s medium- and long-term climate goals are jeopardized, Müller warned. The shortfall in heat pumps and electric vehicles will become harder to close with each passing year. To meet these goals, decisive and reliable political action is crucial. In the building sector, this means upholding the Building Energy Act, which mandates that new heating systems must use at least 65 percent renewable energy. This creates trust and investment security, even for the heating industry, which has already massively expanded its production capacity for heat pumps.
In the transport sector, the transition to e-mobility must continue to be pursued rigorously. Betting on climate-neutral fuels for vehicles and heating systems, however, would be counterproductive. This would exponentially increase demand for renewable electricity and drive up costs, Müller emphasized.
Europe is at a crossroads: While European regulation is tightening the CO2 limits for new cars next year as planned, the German car industry is struggling to remain competitive. Cheap electric vehicles from China are putting pressure on the market, while ambitious emissions targets are set to accelerate the transformation of the industry – with uncertain consequences for jobs and innovation. In this situation, Volkswagen and Mercedes – unlike BWM or Opel – are pushing to soften the upcoming CO2 limits.
However, softening the CO2 fleet limits in the EU from 2025 would be a serious strategic mistake that would damage the German automotive industry in the long term. Instead of focusing on the future markets of electromobility, such a decision would chain the industry to the past – in a shrinking market for combustion engines.
The future market is clear: electric vehicles. They are already on the way to becoming competitive in terms of production costs. Thanks to falling battery costs, they will be cheaper than combustion engines by the end of this decade at the latest. This development is being accelerated by technological advances, economies of scale and massive investment in the charging infrastructure. At the same time, the operating costs of combustion engines are increasing due to rising energy prices, CO2 levies and higher maintenance costs.
The transition to electromobility is not only inevitable but also economically indispensable for an industry that wants to remain globally competitive. A strategy that continues to rely on combustion engines ignores this dynamic and ties up resources in an outdated concept.
Currently, newly registered cars may not emit more than 115.1 grams of CO2 per kilometer on average in the EU. In 2025, this limit would fall to 93.6 grams. Softening the CO2 limits would mean passing on the costs to consumers. How is that possible?
Lower CO2 fleet limits would slow down the sale of electric vehicles, as the pressure on manufacturers to offer zero-emission vehicles would decrease. This would have immediate consequences: In three years’ time, there would be more vehicles with combustion engines on the roads, which would increase CO2 emissions. These additional emissions would be reflected in the ETS-II emissions trading system, which will also cover the transport sector in the future. Higher emissions lead to a shortage of certificates and therefore to rising prices. These additional costs will be passed on directly to consumers in the form of higher gas and diesel prices at the gas station. The strategy of the Brussels lobbyists therefore amounts to shifting the costs of the transformation from the automotive industry to the public, while at the same time delaying the urgently needed reduction in emissions.
However, a flexibility option that allows the fleet limits to be exceeded in 2025 and in turn overcompensates for the fleet limits for 2026 would have virtually no impact on the ETS II CO2 prices in the following years. In these years, the same amount of CO2 emissions would be generated in the transport sector with or without the flexibility option. In this respect, a flexibility option limited to 2025 and 2026 would be acceptable.
The assumption that the existing CO2 limits for 2025 would result in billions being paid out to the German car industry per se should be treated with caution. Rather, the limits create incentives to push more EVs onto the market at a discount and to offer combustion engines without a discount: a desired effect in order to achieve the fleet limits, avoid fines, and take an important step towards achieving climate targets.
The argument that the softening of fleet limits is necessary to ensure “technological openness” also turns out to be a smokescreen on closer inspection. The aim behind this buzzword is often to keep the combustion engine artificially alive. While hydrogen and e-fuels are propagated as alternatives for propulsion, these technologies are neither sufficiently available nor economically suitable for widespread use in passenger cars.
The cost of producing e-fuels is disproportionately high and the energy loss during their production and use is enormous. Biofuels, on the other hand, are hardly sustainable in large quantities. In fact, these “alternative technologies” are often just a pretext for delaying the transition to electromobility and protecting fossil fuel business models.
The German automotive industry has the opportunity to secure its global leadership position by consistently focusing on electromobility. Competitors from China and the USA are investing massively in electric vehicles and already dominate key markets. Those who now rely on a stagnating past market risk being left behind in global competition. Instead of softening the limits, the EU should stringently maintain its fleet limits and thus set the course for sustainable, future-proof mobility. This is not only good for the climate, but also crucial for the long-term competitiveness of the German automotive industry.
Prof. Dr. Felix Creutzig heads the Land Use, Infrastructure and Transport working group at the Mercator Research Institute on Global Commons and Climate Change (MCC Berlin). He is Bennett Chair for Innovation and Policy Innovation at the University of Sussex and is a member of the Expert Advisory Board on Climate Protection in Mobility.
