Germany’s Climate Foreign Policy Strategy: Insights into Key Issue Areas and Potential for Future US-German Cooperation

1. The Strategy in Germany's changing foreign policy context

The publication of the Climate Foreign Policy Strategy (“the Strategy”) marks an important development in Germany’s engagement on international climate policy. The domestic framework underpinning this workstream was set in 2021, when the Social Democrats (SPD), the Green Party and the Liberal Party (FDP) formed a new government coalition at the national level. The coalition agreement formulated the ambition to pursue a coherent “climate foreign policy”. Institutional reforms subsequently elevated the foreign policy dimension of the climate crisis, with the mandate for international climate negotiations (under the United Nations Framework Convention for Climate Change, UNFCCC) moving to the Federal Foreign Office. In March 2022, Foreign Minister Annalena Baerbock created the post of a Special Envoy for Climate Action and nominated Jennifer Morgan to assume the position as a State Secretary. Climate foreign policy would mainly be on the portfolio of a core group of ministries: the Federal Foreign Office, the Ministry for Economic Cooperation and Development, the Ministry of the Environment, and the Ministry for Economic Affairs and Climate Action. As a consequence, the Strategy was co-developed with a whole-of-government approach under the leadership of the Foreign Office. 

The Climate Foreign Policy Strategy should be understood in the context of a broader re-orientation of German foreign and security policy. In early 2023, the government published its first National Security Strategy, following a broad conception of “integrated security” including resilience and sustainability considerations alongside security and defense. This overarching framework was followed by two subsequent, more issue-specific doctrines: The Strategy on China (July 2023) as well as the Climate Foreign Policy Strategy (December 2023). This strategic re-calibration has become acutely relevant given external shocks - including the implications of the COVID-19 pandemic and Russia’s war of aggression against Ukraine. Following Russia’s invasion of Ukraine, Chancellor Scholz declared a “sea change” (“Zeitenwende”) on foreign and security policy, with profound implications not only for Germany's defense policy, but also its energy policy, as Germany was forced to wean itself off Russian natural gas. Finally, the climate crisis itself leads to growing risks and damages in Germany and globally. Taken together, these new vulnerabilities have amplified the need for a strategic consolidation. 

2. Strategizing climate policy: The importance of partnerships to realize climate targets and foreign policy interests 

Beyond the changing security context, a growing sense of urgency considering the state of the planet and a rapidly shrinking carbon budget underlies Germany’s approach. While it is among the largest historic emitters of greenhouse gases (GHG), it currently accounts for two percent of annual emissions, with additional emissions embedded in trade, and hence relies on international cooperation and action beyond its borders to achieve global climate targets. Simultaneously, growing climate risks and costs require foreign policy instruments to scale up adaptation. The Strategy recognizes increasing impacts due to man-made climate change, and concomitant detrimental effects – especially on vulnerable communities in the Global South. According to the Intergovernmental Panel on Climate Change’s AR6 Synthesis Report (IPCC), changes in the climate system have led to significant damages, with certain hard limits to adaptation already reached – meaning that no adaptive action and no technology could prevent intolerable risks to human or natural systems. The Strategy also refers to the risk of “tipping points”, i.e. natural systems undergoing accelerated and irreversible change, which may in turn accelerate the climate crisis. Germany’s aim to “keep 1.5°C within reach” reflects the Paris Agreement’s more ambitious target, to avoid risks that would rapidly increase with further global warming.

To address the challenge, the German government has increasingly relied on bilateral and multilateral partnerships to deliver climate action. While the UNFCCC process remains central, there is a recognition that current global ambitions (as reflected in the Nationally Determined Contributions, NDCs) lag behind requirements to achieve the goals of the Paris Agreement. The emphasis on partnerships had already become apparent during Germany’s 2022 G7 Presidency. Since then, the reinforced engagement on GHG mitigation constitutes a significant trend in German foreign policy. For example, Germany has teamed up with a group of industrialized economies (including the US) and the European Union (EU) with the goal to mobilize billions of international climate finance for large emerging economies under the “Just Energy Transition Partnerships” (JETPs). Germany has also expanded bilateral cooperation with large economies, e.g. with India through the 2022 Green and Sustainable Development Partnership, and with the US through its Climate and Energy Partnership concluded in 2021. It is precisely such targeted partnership engagement that characterizes a strategic climate foreign policy approach.

The Strategy emphasizes three types of partners to accelerate climate action:

• Current and future major GHG emitters are highlighted for their potential to contribute to climate mitigation and the future climate finance architecture. In this context, the German government seeks to engage major economies from the G7, and increasingly also the G20. As the second-largest carbon emitter globally, the US plays a pivotal role. 
• Climate justice considerations motivate the engagement with countries in the Global South that are primarily affected by climate change, but have contributed very little to it (e.g. Small Island Developing States, SIDS) and the most climate-vulnerable countries (represented in the V20).
• Germany aims to deepen relations with countries where cooperation may have strategic benefits beyond climate issues. Island nations in the Pacific region are listed as an example, but other actors and regions may also be relevant, to create co-benefits for climate and geopolitical foreign policy interests.

The German government relies on a broad range of climate, energy, and raw materials partnerships to advance its foreign policy interests. In the Strategy, the German government intends, by the end of 2024, “to evaluate the results of our bilateral partnerships and further develop our partnerships concept on this basis. We are seeking even greater strategic alignment of these partnerships in the context of our bilateral relations and to coordinate the ongoing development of our network of partners at the political level.” In this effort, special attention is given to coherence and coordination with policies from the EU and other EU member states. Building on this momentum for strategic consolidation, this paper zooms in on US-German relations to outline issue areas that would benefit from further policy coordination, and highlight entry points for new initiatives and deeper collaboration.

3. Insights into policy areas and implications for US-German relations 

The Climate Foreign Policy Strategy is an extensive document that explains Germany’s positioning both regarding climate mitigation and growing climate impacts. The Strategy covers the following broad priority areas:

• Drastically reducing GHG emissions by 2030, accelerating the global energy transition
• Making the economy more competitive, fair, and climate- and future-proof
• Acting in solidarity with the most vulnerable: Protecting lives, livelihoods, and health
• Protecting, restoring, and promoting the sustainable use of ecosystems
• Strengthening resilience, peace, and security
• Aligning financial flows with a 1.5°C compatible pathway and climate-resilient development

Within each of these priority areas, the Strategy lists a set of sub-priorities or goals, which are in turn substantiated by institutions, processes, and instruments for implementation. Rather than to descriptively list these goals and means, the scope of this present analysis is to highlight key areas that bear potential for reinforced US-German engagement. Special attention is given to new approaches and instruments, or fora where mutual learning can advance overlapping foreign policy interests. In line with the focus on bilateral partnership approaches, the analysis focuses on instruments beyond the UNFCCC process.

The remainder of the paper first discusses implications for US-German bilateral relations. Second, new opportunities for cooperation towards third countries, particularly the Global South, are considered. Finally, climate finance is discussed as a cross-cutting issue. 

Implications for the bilateral relationship

Given the significant emissions mitigation potential of their economies, and the need to reduce GHG emissions in line with the Paris Agreement, the green transition emerges as a central agenda item. At the same time, adaptation action can help implement broad resilience considerations, as is also highlighted in Germany’s National Security Strategy. Both are considered in turn below.

The green transition agenda between cooperation, coordination, and competition

Germany’s Climate Foreign Policy Strategy reiterates the goal to reduce GHG emissions by 65 percent until 2030 (compared to 1990 levels) and achieve GHG neutrality until 2045, thereby contributing to the goals of the EU Green Deal. The US, for its part, aims to reduce GHG emissions by 50-52 percent by 2030 (compared to 2005 levels), and aims for 2050 net zero emissions. Both countries view the build-up of renewables and electrification of industry and transport as contributors to domestic energy security and economic resilience. Together with 131 other countries, they recently confirmed their ambition to triple global renewable energy capacities and double energy efficiency by 2030 (“Tripling up, doubling down”). In Germany, renewables accounted for 59.7 percent of public net electricity generation in 2023, and accelerated deployment brings the country on track to meet the sectoral 2030 target of 80 percent renewables in the electricity mix. However, slower decarbonization and lower shares of renewable energy in the heating and transport sector (18.8 and 7.3 percent, respectively) imply that Germany is currently projected to miss its overall 2030 climate target. In the US, renewables deployment advances at record speed, with 31 gigawatts of solar photovoltaic leading the sectoral transition in 2023. However, renewables deployment is at a lower baseline, and the US will need to speed up its renewable deployment even more to reach its goals.

As the international decarbonization agenda is moving from the negotiation of broad policy goals to a decade of implementation, sectoral cooperation can advance energy transitions. The US-German Climate and Energy Partnership entails working groups on hydrogen, offshore wind, and the electrification of transport, which promote policy dialogue and enable the exchange of technical expertise. While the majority of hydrogen supplies will need to be covered by imports, Germany can learn from the US in the build-up of hydrogen production and transmission capacities, as it implements its national hydrogen strategy. Moreover, policymakers and regulators can engage on the allocation of scarce supplies of H2 through the energy transition. The US, in turn, may benefit from Germany’s experiences in its build-up in offshore wind (a domain where the US has ambitious targets, but deployment has been lagging). Sharing of best practices regarding the management of maritime spaces, the setting of technical standards, and improvement of transmission capacities may help achieve build-up targets. Such technical cooperation is complemented by government-led international fora, such the Clean Energy Ministerial (CEM). While exchanges around permitting and regulatory frameworks are technical, they can promote desirable political outcomes.

As G7 economies have already undergone a long-term trend of decreasing carbon intensity of GDP, they have a shared interest in that decarbonization constitutes a competitive advantage internationally. In this sense, Germany’s goal of “making the economy more competitive, fair and climate- and future-proof” is shared with the US. However, the means to achieve this vary. As both countries aim for leadership and pursue economic interests through the green transition, the relationship is not only marked by cooperation, but also elements of competition. This requires coordination between Germany and the EU on the one hand, and partners such as the US on the other hand.

One task will be to mitigate ramifications from the EU’s Green Deal implementation, notably its Carbon Border Adjustment Mechanism (CBAM). As the increased stringency and sectoral expansion of the EU’s Emissions Trading System (ETS) paves the way for a market-driven phase out of unabated fossil fuels in key parts of the economy, CBAM aims to avoid carbon leakage and hence ensure EU companies’ competitiveness. Following a transitional period, as of 2026, the EU will impose a levy on emissions-intensive industrial goods and electricity from third countries that have not been subject to a domestic carbon price. While the EU and its member states see CBAM as a “global solution” to a “global problem”, industrialized and developing countries have raised concerns that CBAM imposes a barrier to trade. Emerging and developing economies also object that it may hamper their exporting industries without providing adequate resources to compete on equal terms, and that it requires poorer countries to pay the price for decarbonization although historic emissions are concentrated in industrialized countries.

While Germany’s Climate Foreign Policy Strategy commits to enhanced research cooperation, skilled labor training, and technology transfers towards emerging economies to enable the green transition, this will not eliminate industrialized economies’ concerns. The Strategy mainly refers to the International Climate Club to mitigate these issues. Launched by German Chancellor Scholz during COP28, it aims to i) advance ambitious and transparent mitigation policies through reporting, emissions measurement, and addressing carbon leakage, ii) advance dialogue and policy coordination, including on standards and methodologies, iii) enable outreach vis-à-vis emerging economies seeking to uptake green industries. While it is a positive sign that the US joined the Climate Club, it remains to be seen whether a common set of standards can be identified that reflects all parties’ preferences. Looking to replicate experiences from its own decarbonization pathway, the long-term goal, according to Germany’s Climate Foreign Policy Strategy, is the implementation of an international emissions trading and carbon pricing system that is “as uniform as possible”. However, since in many countries (including the US) the imposition of a carbon price is not foreseeable in the medium-term, standard setting in lieu of a carbon price appears as the second-best solution. 

Additionally, both the US and the EU (with Germany as its largest economy) have developed green industrial policies with varying approaches: The Inflation Reduction Act (IRA) provides billions of dollars to industry that aim to attract green industrial production. Targeted subsidies and domestic content requirements aim to “home shore” and “green shore” production, complemented by public infrastructure investments. Partly in response, the EU published the Net Zero Industry Act and the Green Industrial Plan, relying on local content requirements and limited subsidies. While competition may unleash a positive decarbonization dynamic, it is in Germany’s interest to avoid an inefficient subsidies race, and a fragmentation of green value chains. It is a positive sign that the Strategy highlights US leadership on green industrial policy and formulates the ambition to coordinate to avoid barriers to trade. Managing the implications of green industrial policies and CBAM (where a strategic approach to mitigate political concerns has been lacking) is the responsibility of policymakers at the highest level and requires a common approach of EU member states and the Commission. The Council conclusions on green diplomacy of March 2024 constitute a step in the right direction.

Dealing with climate impacts: Opportunities for mutual learning

As mentioned above, Germany’s National Security Strategy considers societal and geo-economic issues, as well as hard security concerns under an overarching framework of “integrated security” and societal resilience. The German government frames climate impacts as a cross-cutting challenge that requires attention across government domains. This presents new opportunities for US-German cooperation. 

First, the Climate Foreign Policy Strategy formulates aims to strengthen the German Armed Forces, the Bundeswehr’s, posture and preparedness vis-à-vis climate change and to address its impacts on mandates and capabilities of defense institutions. Growing interest in this topic among the German government is a welcome, if relatively recent, development. There is ample potential for learning and capacity building amongst allies: German administration and defense forces can learn from allied forces in general, and the US in particular, considering that the American defense community has a long-standing track record of studying the implications of climate change and security. In this context, the work of NATO’s new Climate Change and Security Centre of Excellence is highlighted. The US may contribute insights on climate change’s implications for military infrastructure, deployments, resource needs, etc. NATO can also be a venue to develop methodologies and transfer technical skills and knowledge on the implications of climate change and security. In addition, allies could leverage experiences and common approaches to reduce the military’s carbon footprint in the context of procurement and operations.

Second, there is room for bilateral capacity building in civilian crisis prevention and management. The US Department of Homeland Security has long framed the impacts of climate change as a threat to national security, with both slow-onset events (e.g. sea level rise) and fast onset events (extreme weather events) bearing risks to human lives and livelihoods, and economic prosperity. Specialized agencies, such as the Federal Emergency Management Agency (FEMA), are experienced in dealing with extreme weather events (e.g. hurricanes). This may benefit authorities and technical agencies in Germany, where disasters such as riverine floods in 2022 and 2024 not only caused major economic damages, but also exposed gaps in preparedness in emergency response. The integration of nature-based solutions in civilian crisis prevention and management (e.g. as practiced by FEMA) can have co-benefits for adaptive capacities and mitigation potential. Both the US and the German governments have endorsed action plans and roadmaps for their uptake and restoration of critical ecosystems (e.g. coastal areas). Given the growing cost and frequency of climate damage, the transatlantic partnership may be complemented with a dedicated workstream to exchange best practices and identify cost-effective and scalable solutions.

Cooperation with the Global South: new approaches for climate resilience

Regarding the mitigation agenda towards third countries, the Strategy largely reiterates established policy priorities, including the support of 1.5°C-compatible transition pathways through economy-wide mitigation agendas, and the promotion of a global energy sector “predominantly free of fossil fuels well ahead of 2050”. While Germany frames the green transition as an opportunity, it recognizes the need to support socially just policies that benefit all population groups and do not undermine energy access.

Concerning means and processes for implementation, the Strategy re-emphasizes multilateralism and cooperation in a complicated geopolitical environment. It relies on a) the multilateral UNFCCC process (including efforts to ensure ambitious 2030 NDCs and leveraging the NDC Partnership), and b) existing alliances to support the energy transition, including sectoral coalitions with US and German membership, such as the Powering Past Coal Alliance and the Global Methane Pledge. The Strategy aims for a “global phase-out of unabated fossil fuels and a peak of their consumption this decade”, reiterating consensus from the European Council Conclusions in October 2023 and the G7 in May 2023. Domestically, Germany has decided to phase-out nuclear energy, with the last power plants taken off the grid in April 2023, following a brief prolonging of their operations to fill supply gaps through the 2022-2023 energy crisis. In addition, Germany is gradually phasing out its remaining domestic coal power plants, with an envisioned definite end of use in the 2030s (2038 at the latest). As such, the domestic energy system will rely heavily on renewables, with natural gas as a transition technology of choice. Internationally, the German government pursues a broad decarbonization agenda (rather than a narrow de-fossilization agenda) with room for abatement technologies, provided that the carbon intensity of energy continues to decline. However, the government sees “no room for new coal power as cost efficient and economically attractive renewables are already competitive and have co-benefits for human health and the environment”. Second, abatement technologies should not be a distraction from electrification of industry but limited to hard-to-abate sectors. The short- and medium-term goal will be to ensure that Germany’s bilateral energy and climate partnerships and multilateral initiatives reflect these priorities and are implemented swiftly. An important institution with US and German co-leadership is the Just Energy Transition Partnerships (JETPs), the implementation of which currently faces challenges that require, amongst other things, political leadership, enhanced coordination, and the delivery of adequate climate finance as means for implementation.

While support for climate mitigation in third countries remains central to achieving global climate targets and just transitions, Germany’s Climate Foreign Policy Strategy mainly presents new instruments and access points regarding climate adaptation and resilience. “Acting in solidarity with the most vulnerable” is one of the Strategy’s priority areas, in line with the long-standing engagement with the human security agenda. Besides continued cooperation through established initiatives, two specific entry points for policy innovation emerge.

First, the Strategy commits to approach climate action through a public health lens, framed as “a transformational factor driving climate action and climate adaptation”. The One Health approach is highlighted as a reference point, considering environmental, animal, and human well-being as interlinked. One Health has gained political momentum in the wake of the COVID-19 pandemic, which highlighted the risk of zoonic diseases in the age of climate change and accelerating biodiversity loss, and the exacerbating role that climate impacts have on public health emergencies. The integration of health in climate adaptation constitutes an entry point to expand cooperation. A multi-dimensional assessment should analyze the effects of adaptation policy interventions not just on climate resilience, but also on human health, local air quality, dietary options, biodiversity, etc. Such an integrated climate- and health-sensitive programming and assessment approach would allow the consideration of co-benefits and trade-offs, enable informed decision-making, and avoid maladaptation.

Both countries should also continue to support the mainstreaming of health considerations at the multilateral level. Here, they can build on an operationalization by relevant UN institutions, which developed the One Health Joint Plan of Action(2022-2026). This builds on prior analysis and expertise from specialized institutions, such as the WHO global strategy on health, environment and climate change. Insights can also be integrated in bilateral climate and development cooperation projects and programming, building on the 2023 Guide for implementation of the joint plan of action at national level. At the same time, challenges and gaps in implementation include data gathering and management, the dissemination of best practices, and monitoring implementation. Here, Germany and the US can allocate needs-based funding for One Health. 

Second, the Strategy aims to “bring together a coherent protection regime for climate change- and climate disaster-related displacement”. The Strategy invokes action at different timescales (before, during, and after climate disaster) and sectors (humanitarian, migration, etc.), with the US and Germany already cooperating in several areas: As the largest and third-largest contributors to humanitarian aid worldwide, respectively (with the EU in second place), the US’ and Germany’s contributions to disaster response is decisive. The G7 have committed to strengthen anticipatory humanitarian action, with Germany’s Climate Foreign Policy Strategy striving to dedicate five percent of all humanitarian funding to this action area. The Strategy dedicates an entire chapter to approaches that aim to “protect lives, livelihoods and health”. Measures to improve resilience include the expansion of early warning systems; enabling exchange and stronger integration of the humanitarian-development-peace (HDP) nexus; and prioritizing solutions that have co-benefits for adaptation and mitigation in affected countries. Existing initiatives demonstrate the strategic overlap with US foreign policy, including the Global Shield Against Climate Risks co-sponsored by the G7 and the V20.

While instruments on disaster relief and the HDP nexus are relatively well developed, policies addressing longer-term climate migration are in an earlier stage. The Strategy commits to supporting efforts at the UN level to close protection gaps for persons displaced by climate change, and explicitly sets out to consider “complementary protection mechanisms” in addition to agreements under international law. A reformed multilateral regime is a long-term goal, which requires consensus from a diverse set of countries with varying development needs and security interests. It ultimately hinges on a larger diplomatic process, possibly guided by the UN. In the short- to medium-term, Germany and the US could focus on a political process, potentially with a group of allies. There is precedent, as the White House addressed the issue in its 2021 Report on the Impact of Climate Change on Migration. It includes an analysis of protection frameworks, e.g. through the resettlement of affected individuals, and a consideration of multilateral fora addressing the issue. Coalitions of the willing could build on growing engagement with the topic: A recent analysis shows how the OSCE can support governance approaches for better protection in the MENA region. A developed research agenda provides policymakers with propositions that can inform policy making. For instance, building on prior academic research, the German Expert Council on Migration and Integration proposed a taxonomy of climate migration with different policy solutions. In addition to creating safe migration pathways, policy efforts should also aim to enable communities to stay in place – thus supporting a “right to stay”. Academic literature has outlined relevant action areas, including the provision of resources for adequate in situ adaptation (e.g. meeting changing economic needs in places of climate stress) and a climate sensitive human rights approach (e.g. protection against forced eviction).

Furthering a protection agenda can have co-benefits beyond climate justice and security. For instance, providing resources and protection instruments may strengthen relations with island states in the Indo-Pacific region – which both the US and Germany consider a strategic space for their future foreign and security policy. As the Indo-Pacific region is seen as a geopolitically contested space, where Western countries aim to strengthen partnerships, climate cooperation can leverage co-benefits for human rights, economic development, and US and German regional strategic posture.

Addressing climate finance

As a long-term effort, Germany has been building up its contribution to international public climate finance, having contributed over 6 billion EUR in 2022 in grant-equivalent terms. In 2023, the government provided 5.7 billion EUR from budget funds, with 43 percent of the budget earmarked for climate adaptation. As such, Germany has made decisive contributions to developed countries’ pledge to deliver 100 billion USD annually in climate finance to developing and emerging economies. While the pledge was scheduled to be effective from 2020 onwards, it has been collectively achieved in 2022.

Other quantitative targets in the Strategy include the reiteration of the multilaterally agreed goal to double global adaptation finance by 2025, and to contribute 1.5 billion EUR annually to biodiversity protection in 2025. 

As a leading contributor to climate finance amongst developed economies, Germany has been calling on other industrialized nations to increase their contributions to international climate finance. The Strategy specifically mentions the Fund for responding to Loss and Damage, which the country helped get off to an operational start with an initial pledge of 100 million USD at COP28. After the US initially pledged 17.5 million USD, and many other industrialized countries pledged nothing, there are hopes that the US and other countries will make significant contributions to at minimum match leading developed countries. Generally, it should be recognized that the combined committed funding covers only a fraction of needs, with one estimate suggesting that developing countries need at least 400 billion USD annually to deal with economic losses and damages.

At the same time, Germany, as other industrialized nations, aims to expand the funding base beyond traditional contributors mandated under the UNFCCC and Paris Agreement. Political leaders have emphasized the responsibility of large emerging economies with growing emissions, especially amongst the G20 and large petro-economies. Germany seeks contributions from countries that were still considered developing economies at the time of the UNFCCC negotiations’ start in the 1990s but are now advanced economies. 

While the above considerations dominate the political cycle as climate finance is being re-negotiated, developed economies in particular need to confront some more structural issues pertaining to international climate finance.

First, international climate finance needs scaling up to a new order of magnitude to confront the challenges of the global green transition. The Independent High-Level Expert Group on Climate Finance estimates that to be in line with the 1.5°C target, investment needs in emerging and developing economies (without China) will increase from 1 trillion USD annually by 2025 to 2.4 trillion USD annually by 2030. 1 trillion USD of this amount will need to come from external sources. While more private finance also needs to be mobilized, neither Germany’s individual contribution nor developed countries’ collective finance commitments are sufficient to meet these requirements. The pertinent debates about burden sharing for the future climate finance architecture must be cognizant of these absolute numbers.

Second, the quality and scope of climate finance also needs addressing, as much public finance is still provided in the forms of loans, rather than grants, which can complicate long-term climate action for developing and emerging economies that already face acute fiscal constraints and are caught in debt difficulties. This is linked to ongoing debates about the reform of the international financial system. Initiatives may include governance and quota reforms at the international financial institutions and leading on debt relief and debt cancelation efforts. Diplomatic processes such as the World Bank’s reform agenda, the Bridgetown Initiative, and the G20 Capital Adequacy Framework address concrete instruments for greening the financial system, in the process of which Germany aims to be a “bridge-builder” and “pioneer” for the effective tackling of inter-related global challenges. 

Third, while mobilization of climate-positive funding is essential, it is also important to halt climate-negative investments and associated incentive mechanisms. In this context, the Strategy recalls the G7 commitment, first made in 2016, to phase out inefficient fossil fuels by 2025. Progress on this topic has been slow, and current data even suggests a trend of growing subsidies, partly following Russia’s invasion of Ukraine and resulting energy price hikes. The OECD estimates that in 2022, support for fossil fuels in 82 OECD and partner countries almost doubled to a total of 1.4 trillion USD. The fiscal costs for support measures in Germany have risen from about 7.5 billion EUR annually in the 2017-2021 period to an estimated 20.3 billion EUR in 2022.

Phasing out fossil fuel subsidies is critical for the achievement of domestic climate targets, given the transformative potential of a re-direction of these subsidies towards climate-positive purposes and the need for targeted support measures for low-income groups to counter the social hardships of the green transition. Importantly, a subsidy phase out could also strengthen credibility towards Global South countries. 

The German government also reiterates the Glasgow Statement, issued by the US, Germany, and 37 other nations, to end new financial support for unabated fossil fuel extraction abroad until 2023. This, too, has emerged as a contested topic. The Strategy’s wording leaves room for maneuver, listing exceptions for reasons of “geostrategic security of supply'', though projects are contingent on their compatibility with the 1.5°C target. However, according to the IEA’s 2023 Net-Zero Scenario, no new upstream oil and gas projects are needed to meet the Paris Agreement’s mitigation goals. The government’s wording likely leaves the door open for limited support, especially for natural gas projects that may contribute to German supply security. This is not limited to the German context. In the US, the Import-Export Bank, alongside other institutions, is reported to have continued support for new fossil fuel projects abroad, despite a standing order by President Biden to align agency policies with the Glasgow Statement. A recent report indicates that within the G7, the turn has not been made, with 73 billion USD provided for fossil fuels abroad during 2020-2022. 

Many of the above points concern reforms that require an internationally coordinated response, which goes beyond the Transatlantic relationship. However, as two leading global economies with strong influence over international financial institutions, the US and Germany should demonstrate leadership to mobilize international funding at the required scale and speed.

4. Outlook: Implementing climate foreign policy in times of political uncertainties

Confronted with new security threats on the European continent and increasing geopolitical challenges arising from the climate crisis itself, Germany’s foreign and security policy is undergoing strategic consolidation. As the country looks to deepen partnerships based on shared values and interests, reinforced engagement with the US can have co-benefits for the climate, the economy, and credibility towards the Global South.

Germany’s Climate Foreign Policy Strategy is an important communication instrument that provides insights on government priorities and opportunities for future cooperation. Considering the rising costs of delayed action, supporting the economy-wide decarbonization at home and abroad benefits the global climate system and constitutes an investment in national security. At the same time, given the inter-related risks of climate disaster for human insecurity, biodiversity loss, and public health emergencies, greater resources for adaptation are needed. The Strategy formulates promising approaches, but their feasibility hinges on the adequate provision of (financial) resources.

The future of the transatlantic relationship also depends on political developments on both sides of the Atlantic. Despite fears that the sustainability agenda may be undermined amidst political turmoil, the European elections in June 2024 did not see a major backlash against the EU Green Deal and related climate targets. The EU Commission will likely continue to support the Green Deal implementation, although it will increasingly be framed in competitiveness and industrial policy terms. Adjustments to sectoral regulatory policies are possible but are unlikely to reverse the overall framework.

For its part, US elections in the fall of 2024 will be decisive, with political camps having divergent visions. Considering their significance to domestic firms and constituencies, and the scale of the stimulus for the economy, key elements of the IRA may stay in place beyond the current election cycle, as the transition agenda is increasingly perceived as a business model with economic benefits. However, other elements of the climate agenda may be reversed, as a potential Trump administration could ramp up fossil fuel extraction, depart from the Paris Agreement and UNFCCC, and cut down international climate finance. Such a disruptive scenario may alienate the US from the global climate regime. For policymakers to prepare for such disruptive, high-impact scenarios would be quite a different but equally important strategic exercise. 

While political developments are hard to predict, the growing challenge of mitigating and managing the climate crisis are well understood. The adoption of Germany’s Climate Foreign Policy Strategy constitutes a roadmap which aims to confront these challenges.