Joint venture for the cabinet

Climate action did not decide the federal elections in Germany in February 2025, but it will be one of the deciding factors in the success of the new government. That is because measures which advance the mobility transition count towards targets in other areas of policy too. The mobility transition – or the shifting of transport to more environmentally friendly vehicles and means of transport (the mobility and logistics transition) and the move towards electric engines and renewable energies (the engine and energy transition) – is more than just an environmental or transport project. It is also a future-oriented project for state finances and infrastructure investments, competitiveness and jobs, energy supply and purchasing power, quality of life and social cohesion.

In this policy paper, Agora Verkehrswende illustrates how climate action in the transport sector is anchored in core policy areas and what tools and measures a new government can use to advance these efforts. This illustration shows clearly that this job cannot be the responsibility of one ministry alone. Finance, business, digitisation, energy, health, social, international cooperation – all of these policy areas play an important role in the mobility transition, alongside the areas of transport and environment. The Federal Ministry of Finance, for example, recently led the charge on vehicle tax, while the Federal Ministry for Economic Affairs pushed the envelope with subsidies for purchasing electric cars, and the Federal Ministry of Education and Research took the lead on funding innovations in battery technology.

Exceeding past successes will require all relevant departments in the new government to work together closely. This sort of inter-departmental cooperation, coordinated by a climate cabinet, say, requires a clear division of roles and responsibilities, as well as a common understanding of what is to be done and how best to go about it. This paper therefore begins by mapping out where Germany is in relation to climate action in transport and what priorities should be set across departments for the coming legislative session. Subsequent chapters set out in more detail what this means for individual policy areas.

From the COVID pandemic and the war in Ukraine, to recessions, loss of purchasing power and anxieties over social divisions, the climate crisis may have received less public attention of late amongst the maelstrom of other crises, but in the political arena, there is no getting around it. The climate crisis cannot be postponed and protecting against its consequences is firmly anchored in the constitution: the Basic Law of Germany establishes the duty to protect the natural foundations of life and the freedoms of young and future generations. The Paris Agreement imposes obligations on Germany under international law to limit global warming to well below 2°C above pre-industrial levels, and ideally to 1.5°C. EU law also provides for environment policy directives. Regardless, consistent climate action is also in Germany’s interests in relation to its industrial, fiscal and social policy: good environmental policy safeguards and improves the health of the economy and society, while without it, costs, risks and damages increase dramatically. 

The path to climate-neutral transport has proven one of the most difficult tasks for climate action stakeholders in politics, business and society. The transport and environmental policy targets set for 2030 are becoming increasingly out of reach, with a lack of sufficient effective tools and measures underpinning them. The modal shift targets which the German government has set – such as doubling the capacity of passenger rail, or rail achieving a 25% market share in freight traffic – are almost entirely unrealistic at this point. The same can be said of the target of 15 million battery electric cars on the roads – a key criterion for a successful transformation of the German automotive industry.

Since 2021, greenhouse gas emissions generated by the German transport sector have strayed further and further from the necessary pathways to reduction – this despite the COVID pandemic and economic slump which caused a temporary drop in transport performance. According to estimates by Agora, the transport sector will exceed the emissions target agreed in the German Climate Action Act of 125 million tonnes of CO₂ in 2024 by 19 million tonnes. The German environmental protection agency, the UBA, estimates that under current conditions, the transport sector could exceed its targets by a total of around 180 million tonnes of CO₂ by 2030. For the moment, other sectors, especially energy and industry, are able to compensate for the transport sector’s breach of emissions targets. But this cannot and will not be sustainable long-term. Ultimately, all sectors must jointly reduce their carbon emissions to net zero by 2045.

The latest version of the Agora Study Climate-Neutral Germany shows clearly how much transport must also cut its emissions by 2030, if the cross-sector target of a 65% reduction by 2030 is to remain achievable. Additionally, the European Effort Sharing Regulation (ESR) threatens to impose hefty penalties on those who do not meet their climate targets. Immediate action is also necessary with a view to achieving net zero by 2045, especially in the transport sector, specifically: the electrification of car and van transport, shifting travel to buses and trains, shared mobility, and walking and cycling as modes of transport. Conversely, this study also shows that this gap can still be made up without major disruptions to the economy; that at least the cross-sector target for 2030 is still achievable; and that there is still a prospect that the transport sector can become climate-neutral by 2045. The new government has a decisive role to play in whether and how this is achieved.

A path to successful climate action policy is already emerging at an EU level. The Green Deal, passed during Ursula von der Leyen’s first term as President of the Commission, is being followed by the Clean Industrial Deal. This move is intended to align environment and industrial policy. One of the foundations underpinning this approach is the September 2024 report The Future of European Competitiveness by former Italian PM and former President of the European Central Bank, Mario Draghi.

The Draghi Report emphasises that a green transformation is only possible with a strong economy and that, conversely, economic success is increasingly linked to sustainable innovations. This requires an effort far greater in magnitude (when measured as a percentage of gross domestic product (GDP)) than the US’ Marshall Plan, which assisted with the rebuilding of Europe after the Second World War. According to the Draghi Report, the impending competitiveness agenda will require financing of around four to five per cent of the European community’s GDP. The report also highlights the need for a tightly coordinated policy which integrates a number of action areas, from trade policy and assistance programmes, to digitisation, resource use and environmental standards. Establishing a concrete, sector-specific version of the Clean Industrial Deal in the form of the Automotive Action Plan is particularly important for the German automotive industry, if it is to coordinate climate action and competitiveness as complementary goals.

Following the example of the European Commission, the new German government should also tackle the transformation towards net zero and use this as the key to competitiveness. As well as a common willingness and strategy, the various relevant departments must be closely linked at a federal level and influence other areas of action – from a local and federal level, to the European Union and United Nations. 

Building on the linking of climate action to competitiveness, the mobility transition can be utilised to create further added value for society. It also acts as a way of facilitating social participation, improving health and quality of life, and distributing the costs and opportunities of the transformation fairly. Many people on low incomes, for example, cannot afford to travel long distances. This results in less social participation or – in the case of those reliant on a car, in particular – puts a greater strain on people’s wallets and prompts them to go without in other areas of life. That is because in many communities, social, healthcare, shopping, education, leisure and culture amenities are hard to reach without a car. This limits poorer people and, in particular, young people and the elderly, and people with disabilities in their ability to participate in society. This is frequently the case in rural regions with poor public transport connections. Very low-income communities and communities that are heavily reliant on cars are therefore particularly vulnerable in the face of rising fuel prices.

The net zero, competitiveness, and social justice in transport initiatives which the new government should launch in the 21st legislative session can be broken down into four key areas:

• Fostering well-being and social justice through financial reform and an investment offensive: Germany can achieve net zero in the transport sector by 2045 – without reducing mobility and without additional costs above what would have to be spent by 2045 without a net zero ambition. In order to expand the necessary infrastructure and public transport capacities, the German government devises a reliable and constitutionally valid financing strategy, as well as a finance architecture which can be used to ensure a sufficient volume of public investment quickly and long-term. A cross-modal National Highways and Mobility Plan, focused on climate targets, defines how much investment is needed in a future-ready transport system. For private investments – especially in more environmentally friendly vehicles and systems for supplying these vehicles with energy – businesses and households need a framework which guarantees planning certainty and climate action equally. Central to this is a reform of taxes, duties and subsidies on passenger cars based on carbon emissions – from company car and vehicle tax schemes, to carbon pricing with climate dividends and a pay-per-use passenger car toll. This will allow the opportunities and efforts which the transformation entails to be distributed more evenly within society, and individual hardships to be further mitigated through a socially equitable spending of revenues, focused on environmental policy.
   
• Jobs and competitiveness safeguarded thanks to industrial transformation: The long-term success of Germany as a business hub requires industry to take decisive steps to continue on its transformation to become a climate-neutral sector. The greatest future opportunities for the automotive industry lie in a rapid ramp-up of e-mobility. Guidance, plannability and a strong leading market for electric vehicles in Germany are pivotal to this endeavour. For that reason, a stronger link must be established between industrial and environmental policy over the next few years, at both a national and EU level. This effort will continue to be founded on ambitious fleet-wide CO₂ emission targets, which must be underpinned by policy – using tools for expanding e-mobility in commercial fleets, financial incentives which make smaller electric cars, in particular, more affordable, and a continued rapid expansion of charging infrastructure and affordable charging prices. At an EU level, the German government can assert its position in discussions concerning a concrete version of the Clean Industrial Deal for the automotive industry. It also advocates for: more investment in the battery value chain, accommodating the arrival of Chinese battery and vehicle manufacturers based on common rules for the European market, and the international harmonisation and continued development of methodologies for calculating CO₂ emissions along the value chain. Vehicles and vehicle components will ultimately be almost 100% recyclable, in line with the Circular Car vision, and will be produced using secondary raw materials as far as possible.
   
• Reducing costs by integrating e-mobility into energy networks, making the end of the fossil fuel era complete with sustainably produced renewable fuels: The ability to charge bidirectionally – from the grid to the battery and from the battery to the grid – poses enormous potential for reducing costs for both the energy and mobility transition. Effective management of charging demand helps to satisfy energy requirements more efficiently, while at the same time reducing the need to expand energy networks. The resulting cost savings can bolster the move to electric cars. In order to unlock these potentials, the German government develops a clear vision and establishes relevant framework conditions. Sustainably produced renewable fuels are an important complementary factor for climate action in transport, wherever battery electric solutions are not available – in air and maritime transport, in particular. E-fuels manufactured using renewable energy and CO2 captured from the atmosphere will, however, foreseeably be expensive in the coming decades and their availability limited. Their production must therefore be targeted and they must be used efficiently. Thus far, the production of these types of fuels on an industrial scale has encountered significant stumbling blocks. A long-term, cross-modal and cross-sector policy concept which develops additional mechanisms and incentives ensures planning certainty beyond 2030, as a way of minimising the financial risks of setting up production facilities.
   
• Guaranteeing equal social participation in cities and rural areas through affordable mobility: Prices of petrol and diesel will continue to rise as the offsetting of public costs for burning fossil resources increases. It is conceivable that prices will rise significantly in 2027 if the European Emissions Trading System is expanded to the sectors of building and road transport. This makes it all the more necessary to devise a holistic strategy for how people on low incomes, in particular, who have so far been reliant on private combustion engine vehicles, can make the switch to climate-neutral alternatives – be that in the form of affordable electric vehicles, or an attractive combination of bus, rail, flexible sharing and pooling services, and active mobility (walking and cycling). In light of the labour shortage and staff costs, the expansion of public transport services will rely, in the medium-term, on automated vehicles in particular. The aim is a mobility guarantee which safeguards a minimum level of service in public transport across the country, thereby making it easier for people to participate in society. Digital information and booking systems make it easier to access public mobility services and electric car sharing. Additionally, a new offensive for e-mobility in public and private transport can improve the situation in rural areas. In cities, the task is to ensure clean and safe mobility for all, and to design the valuable public space in such a way that it offers greater liveability and climate resilience.

This paper looks at the areas of financing, economy, energy and social participation in more detail in later chapters, considering how these relate to the transport sector and what tools a German government has at its disposal and how it can use these. Two further chapters address areas of action that are closely linked to these areas: digitisation and climate action.

There are also other relevant areas of action and transversal issues, such as boosting the role of local authorities in shaping the mobility transition (Chapters 1.3, 1.4), giving special consideration to rural areas (Chapters 4.2, 4.3, 5.3), EU policy and international cooperation (see the passages in each chapter marked with the corresponding symbols), and research support. In addition to technology-specific research on issues like electric batteries and stores, data platforms, or the circular economy, inter-disciplinary research can investigate the factors that influence individual decisions on the use of specific modes of transport. Relevant perspectives include those from sociology, economics and psychology. Building on these perspectives can lead to a better understanding of what tools and measures are best suited to encouraging environmentally friendly decisions. Policy can thus reach target groups who are currently uncertain, but who can be convinced by corresponding arguments and offers, more effectively and with more targeted incentives and information offers (Chapter 4.6).

Most of the tools and actions described in this paper are not new. Some of them have been the subject of discussion among experts for years; while successful examples of others have already been established outside of Germany. The challenge lies in bringing them together into a coherent, holistic policy concept and turning them into well coordinated government actions. Climate action, or protecting the natural foundations of life, does not necessarily have to be the primary motivator here. The mobility transition is also the most reliable way of putting economic competitiveness and social cohesion front and centre. The new German cabinet has the opportunity to set this course.