Interim status of Germany’s coalition talks: Future government grapples with infrastructure and beyond

Negotiations on the shape Germany’s next government will take are underway in Berlin, where the working groups from the CDU/CSU and SPD met for the first time on the evening of 24 March 2025 to start compiling their coalition agreement. Notably, the results of Working Group 4 (Transport and Infrastructure, Construction and Housing), Working Group 15 (Climate and Energy), and Working Group 2 (Economy, Industry, Tourism) reveal several clues about the future government’s policy – alongside one or two points of contention.

A. Transport and infrastructure

• Accelerated planning and approvals: The parties propose fundamental changes to planning, construction, environmental, procurement and (administrative) procedural law. Formalised procedures are to be made more flexible, the number of stages involved reduced, and assessments currently conducted in duplicate removed. Restrictions are to be imposed on representative actions, and public consultations in planning procedures limited to a single opportunity. The parties plan to remove the requirement to perform costly Planfeststellungsverfahren planning approval procedures for some projects – particularly the construction of replacement infrastructure – and instead rely on the Plangenehmigungsverfahren  procedure with its significantly simpler requirements as the standard procedure. Uniform procedural law is to apply to all infrastructure projects. Further, the paper announces a Nature Area Requirements Act (Naturflächenbedarfsgesetz) that will facilitate the designation of compensatory measures and provide for biotope connectivity between them.
• Public transport: The parties want affordable, available and environmentally friendly mobility in urban and rural areas alike. Transport infrastructure is to be transitioned to a ring-fenced financing model that draws on funds from the general budget, user fees and private capital. Measures are to be taken to promote walking and cycling. To strengthen public transport, the parties plan to establish a new legal framework for its financing and initiate a modernisation plan with regionalisation funds to be primarily used to order local and regional passenger rail services. The Deutschlandticket is to be continued beyond 2025, with user fees to see incremental, socially equitable increases from 2027. And the public bus fleet is be retrofitted to run climate neutrally. 
• Road transport: The parties intend to allocate financial resources from the special fund to tackle the backlog of road infrastructure repairs, focussing in particular on bridges and tunnels. Driver training is to be reformed to make driving licences more affordable, while maintaining current standards. To address the shortage of drivers, the parties also plan to update professional driver qualifications and improve infrastructure conditions. The licensing process for heavy haulage and abnormal loads is to be accelerated. Efforts to expand nationwide charging infrastructure are to be intensified, and Germany is to become the leading market for autonomous driving, developing and co-financing model regions with the federal states. The introduction of a speed limit of 130 km/h on German motorways is still being debated. 
• Rail transport: Investment in the German rail network is to be significantly increased and freight transport increasingly shifted from road to rail – an endeavour for which an “infraplan” is to be developed as a statutory control element and funded through a “rail infrastructure fund”. The focus here will be on the digitalisation and electrification of the railway infrastructure. Deutschlandtakt – Germany’s integrated rail timetable – is to be gradually expanded through improvement of railway infrastructure. In the medium term, the parties plan to enhance rail transport quality through comprehensive rail reform, which will include the further separation of DB InfraGO from the DB Group through legal, personnel, and organisational measures. 
• Waterway and air transport: Waterways, locks and sea and inland ports are to be modernised and expanded. On aviation, the parties aim to shape modernisation of the industry towards fair competition and decarbonisation. The parties have agreed to work to improve international connectivity at German airports to support economic growth. The parties also plan to reverse the 2024 increase in air traffic tax and abolish the PtL quota. Aviation-specific taxes, fees and charges are to be reduced. European airlines are not to face greater disadvantages from the Sustainable Aviation Fuel (SAF) quota than non-European carriers. Additionally, half of the revenue from the ETS 1 for aviation will be allocated to promote SAF market adoption. 

B. Climate and energy

• Climate protection: The use of carbon capture and storage (CCS) is to be enabled, particularly for emissions from the industrial sector that are difficult to avoid. Lead markets are to be created for climate-neutral products, e.g. through quotas for climate-neutral steel and a green gas quota.
• Emissions trading: The European Green Deal and the Clean Industrial Act must be further developed, the working group says. Emissions trading will continue to be promoted as a key component and efforts will be made to persuade more countries to support carbon pricing, with an emphasis on competitiveness and social acceptance. The CDU/CSU wants negative emissions and Article 6 credits within the meaning of the Paris Agreement on climate change to be taken into account in the ETS 1. The paper also supports introducing the ETS 2, whereby assistance will be provided for households and economic sectors under particular strain.
• Energy transition: Solar energy, wind energy, bioenergy, geothermal energy and hydropower, among others, will be relied on to ensure the success of the energy transition. The parties would also like to strengthen technologies such as heat recovery and airborne wind energy. By the summer recess of 2025, a monitoring system will show electricity demand as well as the current status of renewable energy expansion and related aspects and will serve as a basis for further action.
• Energy prices: The parties want to lower electricity tax to the minimum rate required by European law and reduce both surcharges and grid fees. Electricity price compensation will be extended permanently and expanded to other sectors. The working group paper also provides for special relief for energy-intensive companies (industrial electricity price). The gas storage surcharge is to be abolished altogether. Particularly with regard to reducing energy costs for energy-intensive companies, these measures tie in with the European initiatives providing for measures such as increasing the efficiency of grid fees, reducing energy levies and taxes, and facilitating power purchase agreements via the European Steel and Metals Action Plan and the European Action Plan for Affordable Energy. 
• Accelerated planning and approvals: Renewable energy expansion is to be accelerated by simplifying planning procedures. The CDU/CSU wants to waive nature conservation compensation in the case of energy transition projects and reduce representative action rights or abolish them at European level.
• Grids: The working group paper stipulates that critical energy infrastructure should be robust and safeguarded as effectively as possible, and makes reference to the implementation of the NIS 2 Directive in this connection. The parties still disagree on the expansion of HVDC transmission grids: The CDU/CSU prefers overhead lines, while the SPD prefers underground cables. 
• Flexibilisation: The flexible use of renewable energies is to be improved. Among other things, the parties want to recognise energy storage systems as being in the overriding public interest and also give them the status of privileged renewable energy generation plants.
• Financing: The working group paper envisages an investment fund for energy infrastructure, with public guarantees and private capital playing a role. 
• Wind energy: While the SPD wants to stick to the two percent land-use target, the CDU/CSU wants to be able to replace the land-use target for wind energy with a green electricity target.
• Geothermal energy: The parties intend to amend the Geothermal Energy Act (Geothermie-Gesetz) to address the issue of exploration risk mitigation.
• Power plant strategy: The parties want to incentivise the construction of up to 20 GW of gas-fired power generation capacity by 2030 in a technology-neutral manner.
• CCS/CCU: A legislative package is to allow both carbon capture and storage (CCS) and carbon capture and utilisation (CCU). In this context, the parties consider the ratification of the London Protocol and the creation of bilateral agreements with neighbouring countries to be a top priority.
• Hydrogen: The working group paper envisages a hydrogen core network that connects industrial centres across Germany, including eastern and southern Germany. The plan will include hydrogen storage facilities.
• Fossil-fuel phaseout and structural change: The parties intend to stick with the plan to phase out coal power by 2038. The timetable for taking coal-fired power plants off the grid or into reserve will depend on how quickly it is possible to increase the number of dispatchable gas-fired power stations.
• Nuclear energy: The CDU/CSU maintains that nuclear power can play a significant role in achieving climate goals and ensuring energy security and emphasises research into next-generation nuclear energy, small modular reactors and fusion power plants in the European context. It proposes that a review be conducted to establish whether it is still technically and financially feasible to resume operations at the nuclear power plants most recently shut down and that the further decommissioning of those plants be stopped immediately. In contrast, nuclear power does not feature at all in the SPD’s paper. 
• Combined heat and power: The parties plan to adapt the Combined Heat and Power Act (Kraft-Wärme-Kopplungsgesetz)  in 2025 to meet the challenges of climate-neutral heat supply, harness flexibilities and introduce a capacity mechanism. 
• Energy efficiency: Energy efficiency is to be improved using tax incentives and market signals. The parties plan to amend and simplify the Energy Efficiency Act (Energieeffizienzgesetz) and the Energy Services Act (Energiedienstleistungsgesetz), without hindering electricity price flexibility. While the CDU would like to trim both laws back to EU requirements, the SPD wants to retain the stricter German regulations. The CDU is also in favour of a relative energy-savings target, while the SPD would prefer an absolute target. 
• Heating: There is currently significant disagreement on the topic of heating. The CDU plans to abolish the Buildings Energy Act (Gebäudeenergiegesetz, “GEG”) and seeks a paradigm shift from a short-term energy performance approach for individual buildings to a long-term focus on emissions efficiency, while maintaining subsidies for the installation of heating systems. The national buildings efficiency classes in the GEG are to be harmonised with those of neighbouring countries, and any room for manoeuvre in implementing the Energy Performance of Buildings Directive utilised. However, the specific areas of flexibility are not specified. The CDU also supports extending the implementation deadline. In contrast, the SPD would like to see the GEG amended to make the current regulations more technology-neutral, flexible and simpler while ensuring reliable, unbureaucratic, efficient and socially tiered subsidies.The SPD also wants carbon reduction as the key parameter with which to steer improvements in overall building performance through heating system, building envelope, and surrounding works. The SPD is also calling for the new rules to come into effect nationwide on 1 July 2026 in municipalities with over 100,000 inhabitants, and on 1 July 2028 in other municipalities. Despite these differences, both parties agree that the GEG and municipal heat planning must be more closely aligned and plan support for the construction of local and district heating networks – primarily through statutory federal funding for efficient heating networks (Bundesförderung für effiziente Wärmenetze, “BEW”), although exactly how to implement this remains a matter of debate. To create secure investment conditions, amendments to the Ordinance on the General Terms and Conditions for the Supply of District Heating (AVBFernwärme-Verordnung) and the Ordinance on Heat Supply (Wärmelieferverordnung) are in the works.
• State shareholdings: The parties plan to consider strategic investments in the energy sector. 

C. Economy, industry and tourism

• Starting a business: To reduce bureaucracy, the parties plan to investigate the establishment of “business incubation zones”, simplify notary procedures, and enable digital notarisation with automated data exchange between notary, tax office and trade licencing office. The aim is to create a one-stop shop that bundles together all necessary applications and administrative procedures, and make it possible to start a business within 24 hours. In addition, employee participation programmes are to be strengthened through practical improvements to tax and social security law.
• Championing AI: Germany must become more digital, say the negotiating parties – and become a hub of AI development. A living laboratory law is to be enacted for this purpose. The parties consider massive investment to be required in digital, cloud and AI infrastructure and in the integration of AI and robotics. They also plan to promote lightweight construction, additive manufacturing and 3D printing. Industrial AI is to be strengthened through an innovation-friendly regulatory regime that will improve competitiveness and productivity.
• Innovation offensive: The parties plan to establish a EUR 100 billion leveraged “Germany Fund” comprising EUR 10 billion from the federal government in the form of guarantees and financial transactions, and EUR 90 billion in private capital and guarantees. The fund will serve to close financing gaps around growth and innovation capital, with a particular focus on the Mittelstand  and scale-ups. Individual investment decisions will be made using a corporate governance model, and the investments made in Germany only. The Germany Fund is to serve as a model for similar funds at state level. The CDU/CSU also wants to inject EUR 2 billion from previous banking levies into a leveraged fund for the Mittelstand in cooperation with the banking industry. The fund would provide up to EUR 10 billion in equity and debt capital for the digital transformation of large German Mittelstand companies with limited access to capital markets and for their transition to climate neutrality. However, no agreement has yet been reached with the SPD. The existing Future Fund is to be operated beyond 2030, encouraging additional private investment in the WIN initiative and doubling its size to more than EUR 25 billion. Additional leverage is to be supplied through federal guarantees. The financing structure for start-ups is to be subjected to an efficiency check. By championing a Solvency II reform and implementing it pragmatically, many billions of euros could be mobilised by reducing capital requirements for infrastructure projects and venture capital. Additive capital buffers will be abolished, if possible. Public financing programmes are to be made available for security and defence technologies, and moonshot technologies are to be promoted using milestone financing. To counteract women’s under-representation in the start-up sector, greater focus is to be placed on financing female founders and funding established specifically for them.
• Housing: The parties want to reduce financing costs for new home construction by harnessing synergies between the federal government’s financing conditions and the housing sector’s expertise, enabling a large number of dwellings to be built in tight housing markets for less than EUR 15 per m².
• Permit and approval procedures: The length of permit procedures for industrial plants is to be reduced. To that end, EU directives regulating the industrial sector will be implemented without prejudice. The approval of plants under emissions control legislation is to be simplified.
• Preventing exodus of energy-intensive companies: In response to the risk of energy-intensive companies leaving Germany due to its divergent climate protection standards, the parties plan to support the European Commission’s proposed omnibus initiative ((EU Commission plans to simplify CBAM Regulation with omnibus simplification initiative | Gleiss Lutz) and Omnibus simplification package – EU Commission plans to simplify the CS3D | Gleiss Lutz)) aimed at simplifying the Carbon Border Adjustment Mechanism (CBAM), and make it less bureaucratic and more efficient. Measures addressing potential disadvantages for exports of products covered by CBAM are also to be introduced. Where energy-intensive companies leave Germany despite CBAM, the competitiveness of export-oriented industries is to be maintained through the free allocation of certificates.
• State aid schemes: The coalition parties aim to reform state aid law to strengthen the European Economic Area, focussing on accelerating and simplifying State aid procedures. The IPCEI procedure is to be strengthened, simplified and accelerated; Germany is to participate in IPCEI Med4Cure. Support frameworks for industrial investments and large-scale projects are to be modernised and existing State aid programmes for industrial decarbonisation are to continue. There is still disagreement about the SPD’s demand to tie State aid to social partnership, adherence to collective bargaining agreements and the prevention of site closures.
• Steel industry: The steel industry is to receive support in its transformation to climate neutrality, with a focus on utilising CCS technologies. Maximising the recycling of steel scrap is expected to contribute to short-term decarbonisation and will be actively encouraged. The parties also aim to advocate for a successor regime to the EU Safeguard measures, which are set to expire in 2026.
• Chemicals, pharmaceuticals and biotechnology: Germany is to become the world’s leading innovation hub for chemicals, pharmaceuticals and biotechnology. To achieve this, the federal government, states, businesses, and trade unions will develop a Chemicals Agenda 2045. Rather than imposing blanket bans on entire substance groups, the focus will be on creating a balanced European regulatory framework based on risk assessment. Additionally, chemical recycling and the circular economy for plastics is to receive support. The national pharmaceutical strategy will be further developed to enhance the conditions for the development and production of medicinal products, active ingredients, and medical devices. Biotechnology is to be promoted as a key industry, with efforts made to facilitate its application. Investments under the European Chips Act and the IPCEI are planned to strengthen Germany’s position as a leading hub for microelectronics.
• Automotive industry: The automotive industry is a key industry and vital source of employment. Support for regional transformation networks and transformation hubs is to be continued beyond 2025. At European level, efforts will be made to ensure that fines for car manufacturers are avoided. In addition, the CDU/CSU wants to push the EU to gradually phase out emission standards in order to avoid a double burden due to CO₂ fleet standards and the inclusion in the EU emissions trading system from 2027, but has not yet been able reach an agreement with the SPD on this. The review of CO₂ reduction targets for heavy commercial vehicles and trailers is to be brought forward. A statutory quota for electric vehicles has been expressly rejected. The CDU/CSU wants to abolish the ban on combustion engine cars from 2035 and also advocates for the entire life cycle of a vehicle to be taken into account in carbon accounting in future and for fleet regulations to be revised. At the same time, all fuels that can help reduce CO₂ are to be recognised. The SPD has not yet agreed to this and wants to retain both the fleet emission standards and the goal of allowing only zero-emission vehicles to be registered throughout the EU from 2025.
• Incentives for electromobility: Electromobility is to be incentivised in various ways. There is agreement on enacting a tax advantage for company cars by increasing the gross price limit for state subsidies for e-vehicles to EUR 100,000; a special depreciation allowance for wear and tear, vehicle tax exemption for electric vehicles until 2035; funding for plug-in hybrid technologies (PHEVs) and extended-range electric vehicles (EREVs) and corresponding European regulations; the accelerated expansion of and securing of financing for a nationwide, needs-based and user-friendly charging and fast charging network for cars and trucks as well as funding of commercial depot charging; the exemption of zero-emission trucks from tolls beyond 2026; and funding of hydrogen charging infrastructure for commercial vehicles. There is still disagreement over the SPD’s planned purchase premium or tax incentive analogous to section 35c Income Tax Act (Einkommensteuergesetz), the creation of a social leasing programme for persons with low and medium incomes, and over proposedrequirements for service stations to offer fast charging points. Autonomous driving is to become commonplace. The establishment of battery cell production, including raw materials extraction, recycling and mechanical and plant engineering, is to be promoted. There are plans to examine how to support the conversion and upgrading of existing plants to meet the needs of the defence industry.
• Aerospace: The parties see aerospace as a key future technology that also plays a central role for the security and military capabilities of Germany. For this reason, the parties want to strengthen the European Space Agency and increase Germany’s contribution to the ESA Ministerial Council Conference. Another aim of the parties is for a German astronaut to fly to the moon as part of an international mission. The parties also want to be involved in an ISS successor solution and support both the launch vehicle sector and initiatives such as a launch platform in the North Sea. To enable SMEs and start-ups to better participate in the market for aerospace solutions, the parties want the state to play a more significant role as a customer.
• Maritime economy: The parties advocate a European maritime strategy that will end up strengthening the competitiveness of shipbuilding, shipbuilding suppliers and maritime technologies. They want to help German shipyards establish themselves in offshore converter platform manufacturing – for example, by furnishing guarantees – and future-proof the maritime research programme for shipbuilding through the decarbonisation of propulsion systems, the use of underwater robotics and the increased use of autonomous ship navigation. The parties are also in favour of a uniform tonnage tax for deep sea shipping in the EU.
• Domestic and foreign trade: The parties advocate a pragmatic, rules-based trade policy with an “EU only” approach to trade agreements. The EU’s framework agreement with Chile, which has already been signed, is to be ratified quickly. In addition, the EU agreement with Mercosur and Mexico is to be actively supported in the Council and also ratified quickly. The parties support ongoing EU free trade negotiations with India, Australia and the ASEAN states. With regard to the US, the aim is to avoid a trade conflict in the short term and to focus on reducing import duties on both sides of the Atlantic; in the medium term, the parties want to reach a free trade agreement with the US. A new Africa strategy is intended to pave the way for deeper trade relations with African states. Economic partner agreements that were introduced to the Bundestag by the previous government are to be ratified in 2025. The investment treaty between the EU and Singapore as well as Vietnam is to be ratified quickly too. The parties are committed to maintaining the WTO system, but also stress that the rules for industrial subsidies are in need of reform in order to achieve a global “level playing field”. At national level, the Foreign Trade and Payments Act (Außenwirtschaftsgesetz) is to be amended, which will speed up and simplify review procedures. Foreign investment in critical infrastructure and strategically relevant departments that conflict with national interests is to be prevented. Economic security and resilience are to be strengthened through stricter security requirements and protection against cyberattacks. Export authorisations are to be simplified and accelerated. The parties are also planning to revise the China strategy based on the principle of “de-risking”.
• Raw materials: The working group paper envisages reducing the consumption of primary raw materials, making better use of both domestic and European resources, diversifying raw materials imports and entering into trade and raw materials partnerships. Efforts to expand the circular economy and its digitalisation will be intensified. The parties also plan to support projects for extracting critical raw materials and, in this context, to provide additional resources in the national raw materials fund as well as to improve the framework conditions for strategically important raw materials.
• Commercial law: The parties want to maintain the universal provision of postal services by reducing bureaucracy in the postal sector and both investigating the potential dissolution of the Federal Institute for Post and Telecommunications (Bundesanstalt für Post- und Telekommunikation) and assigning its functions to other agencies. The CDU/CSU wants to re-link the Federal Cartel Office (Bundeskartellamt)’s power to intervene in the market to legal violations, re-establishing legal certainty. The parties plan to ensure antitrust law is applied effectively and that proceedings are faster and more efficient. They support the effective enforcement of the Digital Market Act by the competent authorities at European level.
• Mittelstand/crafts and trades/self-employed individuals: Mittelstand companies and those in crafts and trades are to benefit from a more flexible legal framework, streamlined award procedures and faster approval processes, including measures to counteract the shortage of skilled labour by expediting works permits for qualified specialists. To reduce bureaucracy and documentation requirements, the CDU/CSU supports eliminating mandatory appointments to certain company officer roles for businesses with fewer than 250 employees and repealing the Supply Chains Act (Lieferkettengesetz). The parties also plan to implement an immediate moratorium of at least two years on all new statutory obligations relating to statistical reporting and to reform assumptions of approval in administrative legislation at both federal and state levels. To further ease the bureaucratic burden, the parties, in collaboration with the federal states, aim to transition the collection of import VAT to a netting model. Business transfers and start-ups in the crafts and trades sector will also receive support. The parties are committed to strengthening funding and innovation programmes, using resources at the Reconstruction Loan Bank (Kreditanstalt für Wiederaufbau) in a way that minimises the impact on the federal budget. To relieve the burden on administration and the economy, reviews of coronavirus assistance payments are to be completed promptly, with the parties proposing to allow the federal states to establish a threshold below which random checks will suffice.   Recognising the cultural, economic and technological potential of the gaming industry, the working group paper aims to enhance Germany’s international competitiveness as a gaming hub by improving the predictability of the funding programme and better aligning it with industry needs. Overall, the federal government’s funding policy is to be streamlined and funding programmes better monitored and accounted for.
• Retail: The parties emphasise brick-and-mortar stores as a key driver of vibrant city centres, economic stability and social participation. However, they also recognise the need to protect the retail sector from being flooded by cheap consumer goods from the Far East and to ensure a level playing field at European level. Regarding EU customs reform, the parties prioritise negotiating e-commerce proposals and believe that companies failing to meet their obligations should have their online trading platform accounts deactivated.
• Structural policy: The parties aim to create equal living conditions through the German national funding system (Gesamtdeutsches Fördersystem, “GFS”) and to promote further growth and employment in structurally weak regions via the Joint Improvement of Regional Economic Structures programme (Gemeinschaftsaufgabe Verbesserung der regionalen Wirtschaftsstrukur, “GRW”). Going forward, the primary focus of structural and regional policy will be on these weaker regions. Within the CDU/CSU, there is disagreement over whether necessary measures should be taken in 2025 to support the Federal States in maintaining the financial capacity of their municipalities by providing half the funding to reduce long-standing municipal debt.
• Tourism: The parties aim to create a new national tourism strategy that tackles economic and sustainability challenges while enhancing Germany’s appeal as a holiday destination. Plans also include measures to improve Germany’s accessibility and connectivity. Steps will also be taken to reduce costs for tour operators by further developing package holiday insolvency insurance through the German Travel Guarantee Fund while ensuring that the current level of protection is maintained and EU requirements are met. Given the pressures on the hospitality sector due to rising prices and the current weak economy, the working group paper also includes a permanent reduction in VAT on prepared food to 7 %.

D. Conclusion

The coming days and weeks of coalition negotiations promise to be exciting. It remains to be seen to what extent the disagreements can be resolved through further negotiations and what form compromises might take. It should not be forgotten that consensus already exists in many areas.