1 Legal framework

1.1 Which legislative and regulatory provisions govern environment and climate regulation in your jurisdiction?

The cornerstone of environmental policy in Germany is set forth in the Basic Law of the Federal Republic of Germany. According to Article 2, paragraph 2 of the Basic Law, the state must protect life and health. This individual constitutional right not only protects against state intervention, but is also considered to protect against unlawful encroachments from private third parties. The individual basic right stipulated in Article 2, paragraph 2 is therefore also considered to provide for the minimum ecological existence.

Environmental policy in Germany also follows from the state declaration of aim set out in Article 20a of the Basic Law. According to this provision, which was adopted shortly after reunification in 1994, the state – in light of its responsibility for future generations – must protect the natural bases of life and animals through legislation and, in accordance with law and justice, through executive and judicial action. This provision also covers the protection of the climate. Individual citizens cannot bring claims against the state based on the state declaration of aim, as this provision is addressed exclusively at the state. However, it is an important order for state legislatures to flesh out the details of environmental protection through legislation. In addition, and more importantly, state authorities and courts may cite Article 20a of the Basic Law as a guiding principle when they apply discretionary provisions of law and undefined terms of law.

Numerous laws at both the federal and state level govern specific environmental issues, such as:

  • the Federal Emissions Control Act, regarding air, noise, vibrations and other environmental impacts;
  • the Federal Soil Protection Act;
  • the Federal Water Act; and
  • the Federal Nature Conservation Act.

An attempt to replace this variety of individual laws with a uniform Environmental Code failed in 2009.

1.2 Which bilateral and multilateral instruments on environment and climate regulation have effect in your jurisdiction?

According to Article 191 of the Treaty on the Functioning of the European Union, EU policy on the environment aims to pursue the following objectives:

  • preserve, protect and improve the quality of the environment;
  • protect human health;
  • utilise natural resources prudently and rationally; and
  • promote measures at an international level to deal with regional or worldwide environmental problems, and in particular to combat climate change.

In addition to these objectives in primary law, numerous environmental EU regulations, directives, decisions and recommendations are applicable.

Given that effective environmental and climate protection requires cross-border efforts, Germany has ratified a large number of treaties and conventions, and is a member of the relevant international organisations.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have? To what extent do they cooperate? What are the mechanisms for cooperation?

Although the competence to legislate environmental law rests mainly with the federation, the implementation and administration of German environmental law are primarily subject to the jurisdiction of the 16 regional states and their authorities. The federation – with its own administrative organs, such as the Federal Environmental Agency – assumes this role only exceptionally. Cooperation between the competent local authorities is mainly organised by the respective ministries of the federal states and the federation. Such cooperation is coordinated through a biannual conference of environmental ministers and, in particular, through area-specific joint federal government-federal state working committees, such as:

  • the Federal Government-Federal State Working Committee on Emission Protection; and
  • the Federal Government-Federal State Working Committee on Soil Protection.

These working committees often issue practical guidance material.

1.4 What is the regulators' general approach to environment and climate regulation/action?

The enforcement of German environmental law is governed by a range of different instruments. These include:

  • planning instruments such as the planning assessment procedure;
  • licensing requirements;
  • monitoring, notification, registration and reporting duties;
  • economic instruments such as environmental state aid, environmental levies, fees, taxes and extra duties; and
  • modern instruments as such as market-driven certificates for greenhouse gas emissions.

2 Environmental protection

2.1 What are the key features of the regulatory regimes that protect the following environmental assets in your jurisdiction? (a) Air; (b) Soil; (c) Fresh water; (d) Sea water; (e) Flora and fauna; and (f) Natural habitats and scenic landscapes.

(a) Air

Air pollution and environmental damage caused by noise, vibrations, light, heat or (radioactive) radiation or similar are primarily governed by the Federal Emission Control Act. The main purpose of this act is air pollution control and noise abatement; but it also protects all other environmental resources, such as soil and water (integrative approach). It establishes the legal basis upon which hazard control measures can be taken. It also reflects the precautionary principle of preventing the occurrence of harmful environmental effects.

(b) Soil

The regulatory basis for soil protection in Germany is the Federal Soil Protection Act. The act aims to ensure the sustainable use of soil and the restoration of soil functions. Negative effects on soil must be avoided and any such negative effects must be remediated. In addition, precautionary measures must be taken.

(c) Fresh water
(d) Sea water

German law provides that water bodies in Germany (both fresh and sea water bodies) are subject to state management. Citizens and authorities must use water responsibly. The most important federal law is the Federal Water Act.

(e) Flora and fauna

Nature conservation and species protection are governed by:

  • the Federal Nature Conservation Act; and
  • the Federal Regulation for the Protection of Species.

The Federal Agency for Nature Conservation – which is subordinate to the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety – is responsible for granting import and export authorisations for protected species of animals or plants.

(f) Natural habitats and scenic landscapes

Several types of protected areas are designated in Germany. These different types are defined in the Federal Nature Conservation Act. They can be classified by:

  • size;
  • protection purpose;
  • conservation objective; and
  • the resulting restrictions on land use.

2.2 What are the key features of the regulatory regime that protects against environmental nuisances (eg, noise, odour and light pollution) in your jurisdiction?

The Federal Emissions Control Act and the Technical Instructions on Noise Abatement aim to protect the population from noise from commercial activities. In line with these instruments, licences for the operation of industrial or commercial installations are issued only if there are no adverse effects on the environment due to noise.

There are also specific provisions on:

  • noise mapping and noise action plans;
  • measures against traffic noise, including railway and aircraft noise;
  • measures against noise from sports and leisure activities; and
  • odour and light pollution regulations.

2.3 What are the consequences of breach of these regulatory regimes?

The German authorities have a variety of instruments at their disposal to enforce against breaches of environmental provisions, including:

  • administrative and enforcement fines;
  • substitute performances; and
  • measures towards permit holders.

Such violations may also result in criminal liabilities.

3 Climate change/action

3.1 What are the key features of the regulatory regime governing greenhouse gas emissions in your jurisdiction?

In Germany, two different emissions trading schemes are operational.

Germany has been a key player in the EU Emissions Trading Scheme (EU ETS) since 2005. With 1,900 installations covered, Germany has the largest share of installations and emissions under the EU ETS in Europe. Operators of large energy plants and energy-intensive industrial plants, plus all aircraft operators that operate flights within the European Union or continental flights to and from Europe, must purchase certificates for the emissions they cause (so-called ‘downstream' emissions trading). The certificates are partly auctioned and partly allocated free of charge. Auctions take place on the stock exchange. The free allocation of certificates is based on product emission values (so-called ‘benchmarks'). These define how much carbon dioxide (CO2) equivalent the most efficient plants emit in the production of one ton of product (eg, one ton of aluminium). The allocation quantity is thus generally calculated using the production volume of the plant. The carbon market has become extremely dynamic and the prices of EU carbon credits have multiplied in recent years.

For emissions outside the sectors covered by the EU ETS, such as heat generation and transport, Germany has thus far lacked a financial incentive to reduce emissions. This is why a national emissions trading system covering the heat generation and transport sectors was introduced in 2021 as a supplement. In these sectors, many climate-damaging emissions result from the combustion of fossil fuels. The national emissions trading system requires the distributors of fuels to purchase pollution rights in the form of certificates (so-called ‘upstream' emissions trading). In other words, they must pay for the emissions that result from the subsequent burning of these fuels. In the introductory phase of the national emissions trading system, a fixed price will apply as follows:

  • 2021 – €25
  • 2022 – €30
  • 2023 – €35
  • 2024 – €45
  • 2025 – €55

From 2026, the price of CO2 will move into a price corridor. Certificates will then be auctioned between a minimum price (€55 per ton of CO2) and a maximum price (€65 per ton of CO2). Within this pre-defined range, the price will be established according to market demand.

3.2 What emissions trading regimes are operational in your jurisdiction and what are their key features?

Please see answer 3.1.

3.3 How prominently does renewable energy feature in the energy mix in your jurisdiction? What regulations and other measures have been put in place to promote the use of renewable energy?

Climate protection has become the key driver of German environmental and energy policy. The Federal Climate Protection Act provides for a reduction in greenhouse gas emissions in all relevant sectors. Key elements of the strategy include:

  • the mass development of renewable energy sources;
  • the phase-out of coal-based energy production; and
  • a reduction in car emissions.

At state level, climate protection legislation focuses on energy efficiency and reduction in the building sector. Finally, new planning and zoning laws are being adopted to address climate change adaptation.

3.4 What regulations and other measures have been put in place to promote greater energy efficiency in your jurisdiction?

In terms of energy efficiency, the German government aims to transform the German economy into one of the world's most energy-efficient economies, while drastically reducing primary energy consumption by 2050. The Energy Efficiency Strategy 2050 is based on three elements:

  • By 2030, primary energy consumption will be reduced by 30% compared with 2008 levels. This corresponds to a reduction in consumption of around 1,200 terawatt hours – roughly the current consumption of the Netherlands and Austria combined.
  • A National Action Plan on Energy Efficiency was launched as a comprehensive package of measures back in 2014 to better realise the potential for energy efficiencies in Germany. Among other things, the focus was on:
    • expanding the range of information and advice available;
    • providing targeted and innovative support for efficiency investments based on established standards for new plants and new buildings; and
    • requiring large companies to carry out energy audits.
  • Roadmap Energy Efficiency 2050, a broad-based stakeholder process, was initiated in 2020. Under this initiative, ways to drastically reduce primary energy consumption by 2050 are being analysed and concrete measures will be implemented by 2030 and 2050.

3.5 What other initiatives have been rolled out in your jurisdiction to combat climate change and its effects? How are those effects typically manifesting in your jurisdiction at the present time?

The Federal Climate Protection Act aims to ensure that Germany can achieve its climate targets. For the first time, it prescribes legally binding climate targets and annually decreasing emission volumes for the energy, industry, buildings, transport, agriculture and waste management sectors. The targets will be achieved through numerous measures, such as targets, incentives, funding and investment programmes. The law aims to ensure that Germany will become carbon neutral by 2045, with binding targets set for the 2020s and 2030s. The interim target for 2030 has been increased to a 65% reduction in greenhouse gas emissions compared to 1990 levels. An interim target of an 88% reduction applies for 2040. The German climate target for 2030 also takes into account the new higher EU climate target for 2030.

The effects of climate change can already be observed throughout Germany. Extreme weather events such as heatwaves and heavy precipitation are becoming more frequent and more severe.

3.6 What impact is Covid-19 likely to have on climate action in your jurisdiction?

The COVID-19 pandemic has slowed down the economy and transport, and reduced greenhouse gas emissions. As industry and commerce recover, it remains to be seen whether there will be a long-lasting effect on greenhouse gas reductions or a return to pre-pandemic levels.

4 Environmental permits and approvals

4.1 What environmental permits and approvals are required in your jurisdiction, and when are these typically required?

Environmental permits are the main instrument to ensure compliance with and supervision of the environmental provisions. The requirement to obtain an environmental permit is regulated differently according to sector and/or environmental resource. For example, plants and installations that cause air emissions or noise impacts, use water bodies or conduct waste disposal activities require a permit from the competent authority. Under EU law, environmental impact assessments are also mandatory during the planning and permit process for most large-scale industry installations.

4.2 What is the process for obtaining environmental permits and approvals? If a permit or approval is refused, can the decision be appealed?

Permit and approval decisions are subject to a material review which is conducted in a preceding administrative procedure. Depending on the importance and environmental impact of the respective project, either a formal permit procedure or a planning assessment procedure may be necessary. The permit procedure usually involves:

  • an application by the project developer;
  • statements by all relevant authorities;
  • public disclosure;
  • statements by interested private parties; and
  • a public hearing.

The procedure ends with the written permit being issued or denied.

The decision to deny an environmental permit or to impose certain conditions and provisions in relation to the permit can be challenged by filing a claim with the administrative courts. In Germany, three stages of appeal exist for administrative proceedings:

  • the administrative courts;
  • the higher administrative courts of the states; and
  • the Federal Administrative Court in Leipzig.

In some states, an objection procedure must be conducted before filing a claim.

4.3 What is the duration of environmental permits and approvals?

Environmental permits, such as permits according to the Federal Emissions Control Act, are typically unlimited in duration. However, other permits, such as water or water extraction permits, have a limited duration.

4.4 What, if any, requirements and restrictions apply to the transfer of environmental permits and approvals?

Most environmental permits are granted for a specific project and are thus object related. These permits are either automatically transferred or can be transferred – in some cases with the approval of or notification to the competent authority – from one party to another. In contrast, personal-related permits that refer to the specific individual qualifications of the applicant cannot be transferred.

4.5 What ongoing rights and obligations apply to the holder of an environmental permit or approval?

The environmental permit itself may contain ongoing monitoring requirements (eg, regarding emission measurements and pollution incidents), as well as ongoing reporting conditions.

4.6 What are the consequences of breach of an environmental approval or permit?

With regard to conditions or time limits set out in the environmental permit, non-compliance may result in:

  • a formal prohibition or closedown order regarding the operation of the installation;
  • a subsequent order; and
  • as a last resort, a dismantling order.

Non-compliance with an additional obligation of the permit may also be enforced through administrative coercion.

The violation of an environmental permit may trigger criminal or administrative offence proceedings.

5 Waste management

5.1 How is ‘waste' defined and regulated in your jurisdiction? Does the regime vary depending on the type of waste involved?

According to the legal definition set out in Section 3, paragraph 1 of the Circular Economy Act, Germany's main waste disposal statute, all substances and objects which the holder discards, intends to discard or is required to discard are defined as ‘waste'.

A state of aggregation is irrelevant for substances to qualify as ‘waste'. However, the law excludes elements such as "non-excavated soils and constructions" from the definition of ‘waste', so this definition applies solely to movable property.

The Circular Economy Act distinguishes between hazardous and non-hazardous waste. Specific requirements (eg, notification, registration, permits) may apply for the handling, disposal and transportation of hazardous waste.

5.2 What key rights and obligations apply to waste operators in your jurisdiction? What are the consequences of breach?

Disposal and storage agents and waste facility operators require specific permits for their activities. Operators of landfills must provide security to guarantee the proper recultivation of the site and prevent damage to the public interests after the site closure. Non-compliance with the regulatory regime may result in administrative fines, sanctions under the permit provisions and criminal liability.

5.3 Are any producer responsibility regimes applicable in your jurisdiction?

The Circular Economy Act empowers the federal government to issue regulations requiring the take-back and recycling of certain waste products. Where such product responsibility applies, producers and distributors may place products on the market only if they comply with the respective take-back and recycling obligations. In this context, the federal government has issued:

  • the Packaging Ordinance for packaging material;
  • the End-of-Life Vehicles Ordinance;
  • the Battery Act; and
  • the Electrical and Electronic Equipment Act.

6 Hazardous substances

6.1 What are the key features of the regulatory regime governing hazardous activities and substances in your jurisdiction?

The Hazardous Substances Ordinance comprehensively regulates health and safety measures for employees who work with hazardous substances. ‘Hazardous substances' are defined as materials, mixtures and products which have certain physical or chemical properties – for example, which are flammable, acutely toxic, explosive, corrosive or carcinogenic.

6.2 What key rights and obligations apply to operators of hazardous sites in your jurisdiction?

If activities involve hazardous substances, the employer must implement appropriate protective measures derived from a site-specific risk assessment. Such measures may include:

  • the suitable design of the workplace;
  • suitable work organisation;
  • the provision of suitable work equipment for activities involving hazardous substances;
  • limitation of the duration and level of exposure;
  • suitable working methods and processes; and
  • the provision of personal protective equipment.

Protective measures should be performed in the following sequence:

  • substitution;
  • technical protective measures;
  • organisational protective measures; and
  • personal protective measures.

6.3 What reporting requirements apply to environmental accidents in your jurisdiction?

In case of emergencies or accidents involving hazardous substances, the competent in-house and external accident and emergency services must be granted access to all relevant information – in particular:

  • advance notification of relevant risks at work;
  • measures to establish risks;
  • precautionary rules and processes to enable the emergency services to prepare their own rectification and safety measures; and
  • all available information on specific risks which will or may arise during the accident or emergency.

The employer must immediately notify the competent authority of:

  • any accident or operational malfunction that causes serious damage to the health of employees during activities involving hazardous substances; and
  • any cases of illness or death.

6.4 What is the process for investigating environmental accidents in your jurisdiction?

Environmental accidents are investigated by the competent administrative and criminal authorities according to the relevant procedural provisions, such as:

  • the Administrative Procedure Act;
  • the Administrative Offences Act; and
  • the Criminal Procedure Code.

In administrative proceedings, the ‘principle of investigation' prevails – that is, the authority is obliged to investigate the facts which are relevant to its decision ex officio.

6.5 What are the potential consequences of breach of the regulatory regime governing hazardous activities and substances – both for operators themselves and for directors, managers and employees?

Breach of the relevant provisions may be penalised with a fine or, in severe cases, a criminal conviction.

7 Contaminated land

7.1 What are the key features of the regulatory regime governing contaminated land in your jurisdiction?

Under the contaminated land regime (as set out in the Federal Soil Protection Act), the authorities have discretion to determine the entity that will be held liable for the clean-up and remediation of soil or groundwater contamination. In theory, the competent authority can proceed against:

  • the polluter;
  • the current owner;
  • the former owner if the site was sold after 1999; or
  • the occupier (including a tenant).

As a practical matter, the authorities tend to proceed against the current owner, as this is generally easiest, unless it has insufficient funds. If this is an issue, the authorities may target the polluter or the tenant as occupier (if applicable). This means that the purchaser of a contaminated site will be generally liable for the clean-up of the soil and groundwater contamination on the properties it has acquired.

7.2 Who bears the liability for the clean-up of contaminated land? Can such liability be excluded or subcontracted/delegated?

Multiple responsible persons may be liable, according to Section 24, paragraph 2 of the Federal Soil Protection Act. This provides for the joint and several liability of potentially responsible parties. The authority has full discretion to pursue the party which, in its view, is best placed to conduct the clean-up fully on its own. That party is then left with a claim against the other responsible parties.

It is standard practice for purchasers to require that any remaining environmental liability risks resulting from contamination prior to closing either be covered by a standard environmental indemnity under the asset purchase agreement or be appropriately factored into the purchase price (if the costs of remediation can be calculated, they can be discounted from the purchase price by way of a price adjustment). However, any payments made under the indemnity will relate only to the contractual obligations between the two parties. Obligations under public law as outlined in question 5.1 remain unaffected and cannot be transferred by way of contract.

7.3 How is liability determined in cases where multiple parties have contributed to the contamination?

Multiple responsible parties will be jointly and severally liable. In case of doubt as to the individual contributions of multiple parties, the joint and several debtors will be obliged to each other in equal shares.

7.4 Can individuals bring proceedings against polluters, landowners and/or occupiers where they have been affected by contamination? If so, which court/tribunal is competent to deal with such proceedings?

An individual who has been affected by contamination may file suit against the polluter, landowner or occupier. Jurisdiction for environmental claims rests with the civil law courts.

8 Reporting, auditing and disclosure

8.1 Are any public registers of environmental information maintained in your jurisdiction? If so, what are they, who can access them and how? What possibilities exist for third parties to access environmental information and what is the process for doing so?

In Germany, the primary environmental register is the register of contaminated sites and suspected contaminated sites. This register, which is operated by the local soil protection authorities, keeps track of sites that may pose a risk to humans or the environment due to harmful changes to the soil, as defined by the Federal Soil Protection Act. Areas that are suspected of being contaminated may include, for example:

  • former waste disposal sites (old landfills); and
  • land that was formerly used for industrial or commercial purposes (old sites) and on which environmentally hazardous substances were handled.

The owner may request an excerpt from the register from the authority. Third parties are entitled to an excerpt from the register only if they can show a legitimate interest. Typically, buyers of real estate are eligible to request an excerpt for a specific parcel of real estate.

8.2 What environmental reporting requirements apply to companies in your jurisdiction?

Subject to state legislation, there may be a duty to report identified pollution to the authorities. However, this reporting obligation applies only if an indication, a concrete indication or an obvious indication of a harmful soil change or contaminated site exists. According to the Federal Soil Protection Ordinance, an indication of a harmful soil change or contaminated site exists in particular if:

  • pollutants were handled on a property over an extended period of time or in significant amounts; and
  • the operation, management or other methods used in the individual case or disturbances of proper operation suggest significant inputs of such pollutants into the soil.

A concrete or obvious indication requires that examinations reveal the excess of test values according to Annex 2 of the Federal Soil Protection Ordinance.

8.3 Are companies in your jurisdiction subject to environmental audit requirements?

Under German environmental law, there is no general obligation to conduct environmental audits. Environmental audits are typically conducted on a voluntary basis under the EU Regulation on Eco-management and Audit Schemes (1836/93) or under international norm ISO 14001.

8.4 When and how must environmental issues be disclosed (eg, in the event of the potential sale of land or a merger or acquisition)?

Sellers under German law contracts would be well advised to fully disclose any environmental issues to the prospective purchaser. Otherwise, the seller risks allegations of fraudulent conduct and as a consequence, limitations of liability may not be invoked. The Federal Court of Justice has held that the mere suspicion of contamination must be considered a material defect (21 July 2017, V ZR 250/17).

9 Tax

9.1 What environmental and climate taxes are applicable in your jurisdiction?

The most important environmental and climate taxes in Germany are:

  • energy tax (formerly known as mineral oil tax);
  • motor vehicle tax;
  • electricity tax; and
  • air transport tax.

9.2 Are any exemptions or incentives available?

The electricity tax and energy tax are waived for certain types of energy consumption in order to avoid double taxation or promote energy efficiency or renewable energy. The taxes are also reduced for companies in the manufacturing, agriculture and forestry sectors, in order to compensate for the high energy and electricity tax burden in Germany and thus promote international competition.

Tax exemptions also apply to the following, among others:

  • electricity for electricity production and energy products for energy production (so-called ‘producer privilege' or own consumption);
  • electricity and energy from certain renewable sources;
  • electricity and energy used for certain processes that are very energy intensive or that serve purposes other than burning; and
  • energy for combined heat and power generation.

9.3 What strategies might parties consider to mitigate their environmental and climate tax liabilities?

Given the commitment to reduce greenhouse gases under the Paris Agreement and the transition to net zero by 2045, it is likely that that any future use of fossil fuels will be subject to higher taxes and levies. In the long run, industrial plant operators should consider a road to net zero.

10 Insurance

10.1 What types of environmental insurance arrangements are put in place in your jurisdiction? Is there any mandatory environmental insurance in your jurisdiction? How sophisticated is the environmental insurance market? What, if anything, is excluded from insurance cover?

Following the entry into force of the Environmental Liability Act and the Environmental Damages Act, environmental insurance is indispensable for operators of industrial or commercial installations in Germany. Therefore, a new environmental insurance model has been introduced on the German market, covering two types of insurance:

  • environmental liability insurance; and
  • environmental damage insurance.

The object of environmental liability insurance is the statutory liability (based on private law) for personal injury and damage to property, along with the consequential pecuniary loss, which is caused by a harmful effect on the environment through the soil, air or water. The insurance typically excludes public law claims. Thus, if the policy holder is required to clean up the property on the basis of public law provisions, it is not covered under the policy. Further, the insurance covers only such risks as are expressly and clearly described in the insurance policy (principle of declaration). The policy holder must therefore ascertain and specify the installations to be insured in a precise and accurate way.

Environmental damage insurance applies exclusively to obligations to remediate environmental damages under the Environmental Damages Act, which entered into force in 2007. The environmental damages that are covered are:

  • damage to species and natural habitats (Section 19 of the Federal Nature Conservation Act);
  • damage to water bodies (Section 90 of the Water Resources Act); and
  • damage to the soil by impairing the soil functions.

Once again, all installations to be covered must be declared specifically in the policy. However, the insurance generally covers only operational malfunctions (with some exceptions), and not business-as-usual operations. This means any that any damages which occur during normal operations within the allowed limits are not covered.

10.2 What are the ‘green finance' arrangements in your jurisdiction? To whom do they apply? What, if any, obligations do they impose? Who is responsible for monitoring, enforcing and reviewing such arrangements in your jurisdiction?

Sustainable finance is primarily regulated by a comprehensive sustainable finance initiative at the EU level. In view of the risks of climate change, the European Union is establishing a completely new legal framework for a sustainable economy as part of the Green Deal and the Sustainable Finance Action Plan. The focus is on environmental and social governance as a broad term for corporate social responsibility. This affects not only the financial sector, but also the real economy at company and product level. Sustainability is therefore no longer a mere marketing tool, but requires determined compliance with a complex legal framework at the corporate level.

The primary responsibility for enforcement in Germany rests with the Federal Financial Supervisory Authority.

In addition to the EU sustainable finance package, the Federal Financial Supervisory Authority has adopted complementary regulations at the national level which are not covered by EU regulation. In order to prevent investors from being misled by ‘greenwashing', the authority recently proposed a directive that explains how the investment conditions of an investment fund must be structured if the fund is explicitly described as ‘sustainable' in its name or in its marketing.

11 Disputes

11.1 In which forums are environmental and climate change disputes heard in your jurisdiction?

Environmental disputes are typically litigated before the administrative law courts. The civil law courts hear environmental disputes only where they are based on private law claims. As environmental law is strongly harmonised with EU law, the jurisprudence of the Court of Justice of the European Union in Luxemburg is also relevant. As far as climate litigation is concerned, the European Court of Human Rights in Strasbourg also plays an increasingly important role.

11.2 What issues do such disputes involve?

In environmental litigation before the administrative law courts, the lawfulness of actions taken by environmental authorities is typically reviewed. Environmental claims before the civil law courts, in contrast, deal mostly with claims for damages arising from environmental contamination between private parties.

11.3 What defences and indemnities are available, both for corporates and for individuals?

The following defences are available in environmental disputes regarding environmental liability:

  • the third-party defence – that is, the environmental damage was caused by a third party and despite appropriate safety measures being put in place; and
  • the compliance with a compulsory order defence – that is, the environmental damage resulted from compliance with a compulsory order or instruction from a public authority.

11.4 How are environmental disputes resolved?

Environmental disputes between individuals and/or corporations and state authorities before the administrative courts are typically resolved by a final judgment, as the authorities typically will not refrain from enforcement or change their position unless a court orders them to do so.

However, as far as the remediation of contaminated sites is concerned, disputes are often settled by entering into a public law agreement. The practical advantages of a remediation agreement over an administrative order are obvious. A contractual agreement opens up the possibility for the party obliged to redevelop to negotiate essential conditions of the redevelopment in detail, in a spirit of equality and cooperation with the administration.

11.5 Have there been any recent cases of note?

In a landmark judgment handed down on 24 March 2021, the Federal Constitutional Court ruled that the provisions of the Climate Protection Act 2019 on national climate protection targets and annual emission levels permitted until 2030 are incompatible with fundamental rights, insofar as sufficient requirements for further emission reductions from 2031 are missing (1 BvR 2656/18). The court held that fundamental rights are violated by the fact that the emission quantities permitted until 2030 under the act substantially reduce the emission possibilities available after 2030 and thus endanger virtually all freedoms protected by fundamental rights. The legislature should have taken precautions to ensure that the transition to climate neutrality preserves such freedoms, but has thus far failed to do so.

12 Trends and predictions

12.1 How would you describe the current environment and climate change landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Two main developments are currently shaping the environment and climate change landscape in Germany:

  • Environmental and social governance is forcing environmental compliance from an investor perspective; and
  • Climate change and adaptation are giving rise to a novel type of litigation that is being tested and promoted by non-governmental organisations (NGOs).

The ground-breaking judgment of the Federal Constitutional Court discussed in question 11.5 has triggered a wave climate litigation Germany. In September 2021, NGOs filed multiple public law claims against nine individual states and civil claims against two German car manufacturers and a gas exploration company. The complaints are based on the argument that the defendants failed to act or acted too late or insufficiently to comply with the greenhouse gas reduction targets under the Paris Agreement. Irrespective of whether these lawsuits are ultimately successful, they are creating public pressure to take action.

13 Tips and traps

13.1 What are your top tips for smooth environmental and climate change compliance in your jurisdiction and what potential sticking points would you highlight?

The diesel car scandal has vividly demonstrated that environmental compliance is not an optional extra, but must be perceived as an integral part of any compliance management system. Environmental compliance is thus gaining in importance and must be reflected in corporate risk management and risk analysis. The German and EU legislatures are supporting this emerging trend by introducing new laws that require risk management and risk analysis with regard to environmental compliance (as illustrated by the recently adopted German Supply Chain Act). The global environmental health and safety management systems of internationally operating companies are also becoming more sophisticated: comprehensive risk management systems are being adopted and in-depth analysis conducted in order to ensure dedicated environmental compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.