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New German coalition sets forth radical climate protection plan

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Social Democratic Party's top candidate for chancellor Olaf Scholz (centre), Free Democratic Party leader Christian Lindner (right) and Green party co-leaders Robert Habeck and Annalena Baerbock (left) walk after a final round of coalition talks to form a new government in Berlin yesterday. Photo: Reuters/Fabrizio Bensch

Social Democratic Party's top candidate for chancellor Olaf Scholz (centre), Free Democratic Party leader Christian Lindner (right) and Green party co-leaders Robert Habeck and Annalena Baerbock (left) walk after a final round of coalition talks to form a new government in Berlin yesterday. Photo: Reuters/Fabrizio Bensch

A group of more than 40 migrants with children get on an inflatable dinghy, as they leave the coast of northern France to cross the English Channel, near Wimereux, France, November 24, 2021. REUTERS/Gonzalo Fuentes

A group of more than 40 migrants with children get on an inflatable dinghy, as they leave the coast of northern France to cross the English Channel, near Wimereux, France, November 24, 2021. REUTERS/Gonzalo Fuentes

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Social Democratic Party's top candidate for chancellor Olaf Scholz (centre), Free Democratic Party leader Christian Lindner (right) and Green party co-leaders Robert Habeck and Annalena Baerbock (left) walk after a final round of coalition talks to form a new government in Berlin yesterday. Photo: Reuters/Fabrizio Bensch

Germany’s incoming coalition government announced its formation yesterday with a radical new plan for accelerated climate protection measures.

The far-reaching reforms, including a faster expansion of renewables and swifter coal exit, were decided as Europe’s top economy intensifies efforts to phase out fossil fuels.

The newly cemented agreement includes plans to ideally bring forward Germany’s coal exit to 2030, from a previous target of 2038 at the latest.

At the same time, Germany aims for renewables to account for 80pc of the country’s gross electricity demand by 2030 compared with a previous goal of 65pc  by installing 200GW of solar and at least 30GW of offshore wind capacity by then.

Among a raft of measures, the coalition said it would also ensure bolder carbon emissions pricing to incentivise a quick exit from fossil fuels, and more support for hydrogen as an alternative energy source, the agreement showed. The coalition, comprising Social Democrats (SPD), Greens and Liberal Democrats (FDP), said it would aim to be climate neutral, and be open to all technologies, except nuclear energy, which will be ditched by the end of 2022 under a previous plan.

“The new government will make the expansion of renewable energies a central project,” the document said of the trilateral cabinet, which will beef up its economy ministry with the responsibility for climate to link its efforts and the interests of export-oriented manufacturers.

Next year, it will adopt a new climate protection programme and it pledged to cut down on red tape to make a faster expansion of renewables possible. The draft said Germany would ensure carbon emissions prices don’t fall below €60 per tonne in the long term if the EU cannot agree on a minimum price in its emissions trading scheme. Carbon trading should be widened to providers of heating and transport, it added.

The benchmark European carbon contract hit a fresh record high of €73.18 a tonne yesterday as a result.

Based on forecasts for power consumption to rise, the government will ask the country’s regulator and transmission grid firms to devise new plans for faster network expansion. Germany will also aim for 10GW of electrolysis capacity by 2030 on which to base a new hydrogen economy that will include huge import activity too.

To help consumers with high energy bills, it will from 2023 pay a renewable support fee known as the EEG levy from the state budget rather than collect it from consumers.

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The prospective three-party government also plans to cut prices retroactively for recently launched prescription drugs to keep healthcare expenses under control, the coalition agreement showed.

Pharmaceutical companies have only been free to set prescription drug prices in Germany, Europe’s largest pharma market, for the first 12 months following approval by the European Commission.

This respite allows for an elaborate benefit assessment and price setting procedure that was introduced in 2011 and which typically results in a discount.

Instead of taking effect after negotiations are wrapped up, the new price will be enforced with a retroactive reimbursement from the seventh month after market launch, if the coalition plan is passed into law during the four-year parliamentary session.

The agreement will install Germany’s first federal coalition between SPD, FDP and Greens, and bring the curtain down on the era of Chancellor Angela Merkel.

“The negotiated reimbursement price is to take effect from the seventh month after market entry,” said the coalition document.

Pharmaceutical sales in Germany rose almost 7pc to €49.5bn last year, according to market researcher IQVIA.

Novartis, Johnson & Johnson, Merck & Co and Bristol-Myers Squibb are among those with the largest market presence in the country, while Bayer , Merck KGaA and unlisted Boehringer Ingelheim are the biggest Germany-based drugmakers.

The German association of research-based pharma companies VFA said the plan may discourage drugmakers from seeking an immediate launch because backdated rebates posed an “incalculable risk”.


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