Germany’s climate U-turn is the worst possible response to the oil shock

The car is perhaps the closest thing Germany has to a national symbol. For this reason, the success of the auto industry and the happiness of motorists has long been a barometer for the standing of the Federal Republic.

Since the beginning of the war on Iran, German news has been filled with stories about drivers. Journalists have filed breathless dispatches from petrol stations all over the country, reporting scenes of anger and frustration at the hike in fuel prices.

The anger is understandable. Diesel rose briefly to over €2.40 (£2.08) a litre, a more than 50% increase on the price a year ago.

Because the effects of the war have been quickly felt in the form of inflation, the crisis in the strait of Hormuz has revealed just how fragile the European economy is – although it is not the first time Europeans have been forced to learn the lesson of their energy dependency. Between 2020 and 2024, Covid, the obstruction of the Suez canal by the Ever Given container ship, Russia’s war on Ukraine and Israel’s war on Gaza all disrupted global trade and EU energy security.

These earlier crises should have taught the German government about how to respond politically to such shocks. But its reaction to the US-Israel war on Iran has again exposed the hypocrisy of energy politics in Germany. Friedrich Merz’s governing coalition of the Christian Democratic Union (CDU), Christian Social Union (CSU) and Social Democratic (SPD) parties, has responded to the latest disruption to oil shipments by doubling down on its commitment to fossil fuels. This has taken the form of new subsidies for fossil fuels and drafting new laws that could defund renewable energy projects.

On 23 March, Katherina Reiche, Germany’s minister for economic affairs and energy, gave a remarkable speech at an energy conference in Houston, Texas, in which she called into question the EU law which enshrines the goal of net zero emissions by 2050. “There is a flexibility we have to get back,” she said, adding that this could only be achieved by “allowing different solutions and technologies” and accepting that it could mean the EU may miss its net zero goal by “maybe 5 or 10% by 2050”.

This apparent reversal from renewable energy was not inevitable. Soon after the war on Iran started, the European Commission president, Ursula von der Leyen (herself a member of the CDU and a longstanding minister under Angela Merkel), made the case for a green transition that could not have been further from Reiche’s statement two weeks later. “Ten days of war have already cost European taxpayers an additional €3bn in fossil fuel imports,” von der Leyen told the European parliament in Strasbourg. “That is the price of our dependence. The fact is, we have energy sources that are homegrown: renewables and nuclear. Their prices have remained the same over the last 10 days.”

At the root of this disconnect between Brussels and Berlin is the CDU and CSU’s systematic disregard for combatting the climate crisis, articulated most vociferously by Reiche. Prior to taking up her ministerial post, Reiche was the CEO of Westenergie AG, a subsidiary of the energy company E.ON.

Her background has drawn harsh criticism from those who see the energy minister as too close to the fossil fuel industry, which has its own set of interests. She seemingly proved her critics right this month, when she opposed a plan put forward by the SPD to tax the excess profits of petroleum companies.

Environmental groups became even more alarmed when Reiche announced she would be halting construction of wind and solar farms and cutting programmes subsidising private solar modules. In their place she has proposed erecting new gas plants. In November, Reiche justified her policy mission in the name of efficiency. “Subsidies and public funding programmes have to be in turn rigorously reviewed,” she said. “Wrong incentives have to be dismantled, even if it hurts.” She hinted at cuts to subsidies for installing heat pumps, which had been introduced by her predecessor from the Green party.

Before the Iran war, Reiche promised she would let the market dictate policy, not the other way around. But she has been happy to carve out an exception for the fossil fuel industry. For instance, she wanted to increase subsidies that would disproportionately benefit motorists who need their car to commute to work. Ultimately, the government agreed to introduce a similarly misdirected subsidy: a tax cut for fuel sold at petrol stations. This will be costly and effectively amount to a transfer of state funds to companies, harming Germans who do not need to fill up the tanks of their cars.

The current crisis – the biggest oil shock in decades – has shown that fossil fuels are neither economically nor environmentally sustainable. The subsidies should therefore go towards extending renewable energy. But the CDU-led government is doing the exact opposite.

The war has proven that when the interests of motorists are at stake in Germany, free market ideology goes out of the window. In late March, a law restricting petrol stations to no more than one price rise a day was swiftly drafted and passed.

In an ideal world, the government would extend the sympathy it offers to motorists by widening the net of relief packages. But when it comes to who is worth spending money on, hypocrisy seems to rule the day.