Decarbonization policy in Germany: strategy, tools and challenges

This article provides a comprehensive analysis of the decarbonization policy of the Federal Republic of Germany, the largest economy in the European Union and the first industrialized nation to proclaim and implement a large-scale energy transition (Energiewende). The study traces the evolution of Germany's climate policy from its historical origins to the current stage, characterized by tightened targets (a 65% emissions reduction by 2030 and climate neutrality by 2045) and the search for effective implementation mechanisms. Based on an analysis of legal acts, statistical data from the Federal Environment Agency, the German Emissions Trading Authority, as well as materials from the International Energy Agency and leading think tanks, the paper examines in detail the key decarbonization instruments. Particular attention is paid to the national emissions trading system (nEHS), its fiscal role and social consequences, as well as the innovative mechanism of "Carbon Contracts for Difference" worth €6 billion, which has for the first time opened the door for carbon capture and storage (CCS) technologies in German industry. The article identifies and analyzes the systemic challenges Germany faces at this critical stage of the transition: the high cost of "green" hydrogen, the risk of deindustrialization under the pressure of rising carbon prices and the phase-out of free allowances, the shift in political direction after the 2025 elections, and the transformation of German forests from a carbon sink into a source of emissions. Case studies of major industrial companies (Thyssenkrupp, ArcelorMittal, Salzgitter) illustrate the structural difficulties of technological transformation. The conclusion posits that Germany stands at a critical crossroads, where achieving ambitious climate goals requires a delicate balance between environmental priorities, economic competitiveness, and social justice. The outcomes of the German experiment will be decisive for the future of the entire European Green Deal.