What is Germany's pathway to limit global warming to 1.5°C?

Under the HPA scenario, electricity as a share of the energy mix grows to 35% of industry’s energy mix by 2030, up from 25% in 2023. Coal is completely eliminated by 2035 and all fossil fuels are phased out from industry between 2040 and 2050. The resulting shift to more energy efficient electricity means that industrial growth is decoupled from emissions. Final energy demand falls by 19% in 2030 and 33% in 2050 compared to 2023 levels due to the energy efficiency gains from electrification.

Green hydrogen emerges an important fuel from 2035, contributing 12% of the energy mix and growing to 17% by 2040. While Germany is planning to scale up hydrogen production, current plans will likely push for blue hydrogen (hydrogen produced from captured CO₂ and fossil gas) rather than green hydrogen sourced from renewable sources.⁵5

To date, heavy industry companies in total have signed Power Purchase Agreements (PPAs) contracts to supply 2.2GW of renewables to meet their demand.⁶6 In 2026, the German government secured EUR 3 bn in state aid by the EU to support the growth of Germany’s net zero technology industry – that is industries manufacturing technologies that help decarbonise other sectors.⁷7 Additionally, it also secured another EUR 5bn to directly support companies in industry sector to decarbonise the processes – this also includes electrification, hydrogen, CCUS, heat recovery and storage.⁸8 This follows the EUR 5 bn in state aid that was approved in 2025.⁹9

In its 2026 Climate Plan,¹⁰10 the German government has largely emphasised financial support instruments for industry, including EUR 2.9 bn for 2027–2030, rather than concrete regulatory or structural measures such as binding requirements, sectoral targets, or detailed implementation pathways (e.g. technology mandates, phase-out timelines, or infrastructure deployment plans).¹¹11 The focus is on scaling up the electrification of process heat and energy efficiency improvements through expanded funding schemes (notably the ‘Energie- und Ressourceneffizienz in der Wirtschaft’ (EEW) and new investment programmes) and the continuation of voluntary initiatives such as efficiency networks. It will also support electrification by reducing electricity prices, but it is not clear by how much. Notably absent is any phase-out plans for the use of fossil fuels.

The government also signals a future ramp-up of Carbon Capture and Storage (CCS) in industry but provides no targets or clear deployment pathway, but rather on the implementation of the Carbon Management Action Plan for future scale-up by 2040. This is concerning as it may prolong fossil gas use and favour a more costly route over electrification; Under the HPA Scenario, CCS use should be limited to capturing process-based emissions from industry, not contributing to core emission reduction targets, with electrification and other zero-carbon options able to eliminate fossil fuels entirely from the energy system.

About a third of Germany’s industrial emissions come from 30 industrial sites across the steel, cement and chemical sectors. These are all covered by the EU ETS, but emissions have not fallen sufficiently – largely due to free allocation of allowances which dilute the price signal and reduce incentive to switch to low carbon alternatives.¹²12 German industry would benefit from setting clear electrification targets for its industry as well as fossil fuel phase out dates.