Party leaders Angela Merkel of the Christian Democratic Union, Horst Seehofer of sister party the Christian Social Union and Sigmar Gabriel of the Social Democratic Party shake on the deal

Renewable energy prominent in German coalition deal

Energy policies feature highly in the coalition deal reached today by German Chancellor Angela Merkel's conservatives and the SPD.

Two months after Merkel's landslide election victory and a month after negotiations began, Germany's two biggest political forces clinched a deal after wrangling through the night, meaning the Chancellor should be able to form a government by Christmas.

Unsurprisingly the bulk of the deal covered issues of financial regulation and EU policy, but a major commitment to renewable energy is also included with a requirement to increase their contribution to total energy production from about 25 per cent now to 40 to 45 per cent by 2025 and to 55 to 60 per cent by 2035 set in law.

Reductions will be made to some subsidies for green energy, the cost of which is passed on to power consumers, to make the energy transition affordable and while they will keep feed-in-tariffs for photovoltaic solar power, the coalition will cut incentives for onshore wind power in areas where it is abundant.

For offshore wind parks, a degression model that enables operators to get financial help quicker in the early years of a park's development will be extended until 2019, but the coalition will review exemptions granted to companies who do not have to pay renewable energy surcharges.

The deal also promises to keep a moratorium on shale gas fracking and back EU plans to prop up carbon prices by backloading permits.

The coalition also said they will "substantially increase" investment in transport infrastructure over the next four years and said they would finance this by expanding a toll on trucks currently charged on motorways, to all national highways, which could bring in an extra €2.3bn a year.

A motorway toll on drivers on foreign-registered cars could also be introduced but the parties said they first must ensure this does not violate EU law.

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