Reshaping Climate Change Law

On 29 April 2021, the German Federal Constitutional Court published a groundbreaking order it already released on 24 March 2021. Following a complaint brought by young climate activists, the Constitutional Court held the 2019 German Federal Climate Change Act as partially unconstitutional. 

The Court argued that the Climate Change Act's provisions on national climate targets and annual emission amounts allowed until 2030 are incompatible with the fundamental freedom rights of the plaintiffs. Further, the existing provisions also lack sufficient specifications for further emission reductions from 2031 onwards. The Court ordered the German legislator to amend the Climate Change Act by 31 December 2022, introducing more specific provisions on how the reduction targets for CO₂ emissions shall be adjusted beyond 2030. Despite being granted more than a year and a half to react to the Constitutional Court's order, the German legislator already adopted an amended Climate Change Act with revised and stricter emission goals.

Aside from triggering the already-implemented change in legislation, this decision will have an unprecedented impact on German climate change regulations and far-reaching ramifications for virtually all industries in the German economy.

The German Federal Climate Change Act and the Plaintiff's Constitutional Complaint

The German Federal Climate Change Act dated 12 December 2019 aims at implementing the obligations of the Federal Republic of Germany under the Paris Agreement, which entered into force on 4 November 2016. The Climate Change Act's main objectives are: 

• to limit the increase in the global average temperature to well below 2°C and preferably to 1.5°C above pre-industrial levels; and 
• to pursue the long-term goal of greenhouse gas neutrality by 2050. 

To achieve these goals, the Climate Change Act required that greenhouse gas emissions be gradually reduced by the target year 2030 by at least 55% relative to 1990 levels.¹ To that end, the Climate Change Act set out the annual allowable emission amounts for various sectors² in line with the reduction quota for the target year 2030. The Climate Change Act, however, did not contain provisions applicable beyond 2030. Instead, it only provided that in 2025 the Federal Government shall set annually decreasing emission amounts for further periods after 2030.³

In the eyes of the plaintiffs – mostly young people from Germany, but also including certain individuals living in Bangladesh and Nepal –, this was not sufficient. 

They claimed that the German Federal Republic has failed to introduce a legal framework sufficient for swiftly reducing greenhouse gases, especially carbon dioxide (CO₂), which would allow not exceeding the CO₂ budget equivalent to a temperature increase of 1.5°C. The plaintiffs deem that a temperature increase above 1.5°C would place millions of lives in danger and risk the crossing of tipping points with unforeseeable consequences for the climate system. Because of such a failure, the plaintiffs argued that the German State failed to comply with its constitutional duties of protecting their lives and health⁴ and properties,⁵ and violated their fundamental rights to a future in accordance with human dignity and fundamental rights to an ecological minimum standard of living (ökologisches Existenzminimum).⁶ With regard to future burdens arising from the obligations to reduce emissions beyond 2030, the plaintiffs argued this would impair their fundamental freedom rights in general.⁷

The Decision

On 24 March 2021, the German Federal Constitutional Court decided by order over the joint complaints of the several plaintiffs.⁸

While the German Federal Constitutional Court denied the standing of the non-individual plaintiffs⁹ and rejected most of the remaining plaintiffs' arguments, it held that the current version of the Climate Change Act violates the fundamental freedom rights of the individual plaintiffs residing in Germany. The Constitutional Court's central finding is that the existing provisions are unconstitutional because they irreversibly offload major emission reduction burdens onto periods after 2030, thereby violating the plaintiffs' fundamental freedom rights in the future.

The Constitutional Court argued that every amount of CO₂ that is allowed today narrows the remaining options for reducing emissions in compliance with the obligations to limit the increase in the global average temperature to well below 2°C and preferably to 1.5°C above pre-industrial levels. Thus, the more permissible the Climate Change Act is today, the more it reduces the options for future generations. The reduction of options in turn affects the exercise of every type of freedom rights because virtually all aspects of human life involve the emission of greenhouse gases and are thus potentially threatened by far more drastic restrictions after 2030. Therefore, the legislator should have taken precautionary steps to mitigate these major burdens in order to safeguard the individual plaintiffs' fundamental freedom rights. To that end, the existing statutory provisions on adjusting the reduction pathway for CO₂ emissions from 2031 onwards were insufficient to ensure that the necessary transition to climate neutrality is achieved in time.

What Consequences to Expect?

The decision's consequences are already tangible: the German legislator already adopted an amended Climate Change Act, which will soon come into force. Under the amended Climate Change Act, Germany shall reduce its greenhouse gas emissions 

• by 65% compared to 1990 by 2030 (instead of currently 55%);
• by 88% compared to 1990 by 2040 (no prior goal); and 
• achieve climate neutrality by 2045 (instead of currently by 2050).¹⁰ 

Accordingly, also the emission budgets for the above-mentioned sectors are revisited and lowered in the amended Climate Change Act.¹¹ However, the amended Climate Change Act sets emissions budgets for the various sectors only until 2030.¹² From 2031 to 2040, only general emission reduction targets shall apply, without setting emission budgets for the individual sectors.¹³ Because of this, another judicial review of the amended Climate Chang Act cannot be ruled out. In that respect, one of Germany's most influential environmental NGO, Deutsche Umwelthilfe, already criticized the abovementioned lack of emission budgets beyond 2030.¹⁴

The amended provisions will in any event affect virtually every industry of the German economy: the energy sector, heavy industry, buildings, transportation, agriculture, land use, and waste management, as well as other undefined sectors.¹⁵ From the perspective of the single industry players, business models may need a revision. At least, they may need to revisit their own compliance with ESG¹⁶ criteria. Accordingly, a variety of long-term agreements may need to be adapted, renegotiated, or terminated. German law generally permits doing so: if the underlying circumstances of a contract have changed in an unpredicted and unforeseeable manner and the parties would not have concluded the contract as it is, they may seek contract adaptation.¹⁷ If contract adjustment is not possible, termination may be an option.¹⁸ A change in legislation may qualify as such change of underlying circumstances.¹⁹

In addition, some companies may also consider lodging complaints against the amended Climate Change Act once released. Potentially, those companies could claim violation of their rights for protection of property or at least seek compensation for expropriation.²⁰ Also, foreign investors may look at the developments in German climate change legislation with interest and may wonder whether they are still treated fairly and equitably. This could lead to a scenario similar to the Vattenfall et al. v. Germany ICSID²¹ case²² or the ICSID cases brought by German energy companies against The Netherlands²³ following the latter's new climate change legislation. Having said this, both domestic companies and foreign investors will need to bear in mind that any of their rights will have to be carefully weighed against the future freedom rights of individuals that are otherwise affected by insufficiently defined CO₂ targets beyond 2030. At the same time, they will also need to evaluate whether actions against the amended Climate Change Act are in line with ESG criteria. 

Finally, while the German Federal Constitutional Court's decision is not binding outside Germany, it may nevertheless be taken note of by foreign plaintiffs and decision-making bodies. For instance, the appellants in La Rose et al. v. Her Majesty the Queen before the Federal Court of Appeal of Canada already referred to the German decision stating that "[t]here is no reason why Canada's constitutional framework should be interpreted as less robust or less capable of holding the federal government responsible for its part in responding to the global threat of climate change".²⁴ It likely will not remain the last reference to the German Federal Constitutional Court's decision.

_{1 Sections 3(1), 4(1) in connection with Annex 2.
2 The energy sector, heavy industry, buildings, transportation, agriculture, land use, and waste management and others, cf. Section 4(1) in connection with Annex 1.
3 Section 4(6).
4 Article 2(2), 1st sentence, of the German Constitution.
5 Article 14(1) of the German Constitution.
6 The plaintiffs based their claims on Article 2(1) of the German Constitution in conjunction with Articles 20a GG and Art. 1(1), 1st sentence, of the German Constitution.
7 Art. 2(1) of the German Constitution.
8 Cases no. BvR 2656/18, 1 BvR 78/20, 1 BvR 96/20, and 1 BvR 288/20. 
9 Two environmental associations were part of the group of plaintiffs, but were ultimately denied standing. By contrast, the foreign plaintiffs were granted standing, but could ultimately not succeed as their fundamental freedom rights are not directly affected by the German Federal Climate Change Act.
10 Intergenerational contract for the climate (last visited on 2 July 2021).
11 Draft Amended Climate Change Act dated 2 June 2021 adopted by the German Federal Parliament, Art. 1, Section 4, Annex 2, at p. 10, para. 9 (last visited on 12 July 2021).
12 Draft Amended Climate Change Act dated 2 June 2021 adopted by the German Federal Parliament, Art. 1, Section 4, Annex 2, at p. 10, para. 9 (last visited on 12 July 2021).
13 Draft Amended Climate Change Act dated 2 June 2021 adopted by the German Federal Parliament, Art. 1, Section 4, Annex 3, at p. 11, para. 10 (last visited on 12 July 2021).
14 Deutsche Umwelthilfe, 'Stellungnahme zum Entwurf eines Ersten Gesetzes zur Änderung des Bundes-Klimaschutzgesetzes (KSG)'(last visited on 2 July 2021).
15 Cf. Annex 1 to the German Federal Climate Change Act.
16 Environmental Social Governance.
17 Section 313(1) of the German Civil Code.
18 Section 313(3) of the German Civil Code.
19 See examples in Finkenauer, in: Münchener Kommentar zur ZPO, 8th edition 2019, Section 313 paras. 232-237.
20 As did energy companies following the German ban on nuclear energy in 2011, cf. (last visited on 12 July 2021).
21 International Centre for the Settlement of Investment Disputes.
22 Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12 (last visited on 12 July 2021).
23 Netherlands faces first ICSID claim over coal plant ban (last visited on 12 July 2021); Uniper poised to file ECT claim over Dutch coal ban (last visited on 12 July 2021).
24 La Rose et al. v. Her Majesty the Queen, Federal Court of Appeal, docket no. A-289-20, Memorandum of Fact and Law of the Appellants, para. 43 (last visited on 12 July 2021)}

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