“What does Merkel think?” The question asked time and time again during policy discussions at a European level. The standard answer for the past six months: “Merkel will not take a position until after the election.” This was certainly true of discussions on climate and energy policy, and in particular the EU emissions trading scheme (ETS). Now the election’s dramatic reshuffle brings fresh hope that Germany will move decisively to fix the EU’s ailing carbon market.
As the European Commission struggled to implement a short term fix – known as back-loading (the temporary removal of permits) – of Europe’s carbon market, the decision was almost entirely held up by Germany’s unwillingness to take a position on the proposal. There were two core reasons for this; firstly Merkel was cautious not to do anything that was seen to be ‘anti-business’ ahead of the election, and secondly the **FDP**, Merkel’s junior coalition partner, flatly refused to support a fix of the EU ETS. The FDP sold their position as ‘pro-business’ with a thinly-disguised nod to the party’s anti-climate agenda, recently seeking to offer an “alternative to the media-driven hysteria” on climate change.
The election has come and gone; the votes cast and counted. The **CDU/CSU** have stormed back to power claiming 311 seats in the Bundestag, just shy of an overall majority. The result has proven an enormous personal victory for Merkel, but it has come at a price. The incumbent coalition partners, the **FDP** party, have for the first time since 1949 failed to gain any representation at all, losing all 93 seats. Welcome news indeed for progressive climate and energy policy! The **FDP** paralysed Germany, and thus Brussels, into not taking a position on the back-loading proposal and long-term structural reform of the ETS.
With the FDP out of the equation Merkel is now negotiating hard to find a viable coalition partner. There are fundamentally two options; the centre-left **SPD**, or the **Greens**. There are many areas of agreement between the parties and importantly all support Germany’s ambitious _Energiewende_, the move towards renewable energy. However, there are deeply complicated relationships at play here. Both smaller parties are acutely aware of the price that may be paid for being the junior partner.
Regardless of which party Merkel decides to go into coalition with, the prospects for the EU ETS look much brighter. Both the **SPD** and the **Greens** are – for perhaps different reasons – supportive of an EU ETS, and more importantly, they both advocated reform of the system so that it becomes a more effective policy instrument. In fact, their greatest criticism of the Chancellor and the **CDU/FDP** coalition has been avoiding the decision on reforming the scheme. Prominent Green Hermann E. Ott called on Merkel to show leadership and “make the ETS functional”. Matthias Groote, **SPD** Chair of the EU Environment Committee in the European Parliament has gone further, accusing Merkel of being “complicit” with the failure of the ETS back-loading proposal.
Now the thorn in the side of Merkel has been removed it looks likely that the new coalition – whatever its composition – will be able to move forward with reform of the ETS, amongst other pressing climate and energy issues.
Merkel said earlier this year: “_I believe that we have a good chance by autumn at the latest to get to a better solution for our German problems. Then Germany will also have a chance to tackle the backloading issue as a whole. That’s what I’m hoping for_.” With a new coalition, lets hope action comes quickly.