Though Germany is known as a green pioneer, its climate targets derive from the European Union's greenhouse gas emission reduction plans.

Almost 60 percent of total domestic EU emissions are limited by an EU-wide target under the Effort Sharing Regulation. This covers emissions from transport, buildings, waste, some smaller industries and agriculture (but not LULUCF), which are not covered by the union's Emissions Trading System (ETS).

The EU ETS covers emissions from power generation, energy-intensive industries and civil aviation through a "cap-and-trade" approach. The EU sets a cap on how much greenhouse gas pollution can be emitted each year, and companies must hold emission allowances for every tonne of CO2 they emit. They receive or buy these permits – and they can trade them. If they emit more CO2 than they have covered by emission allowances, they face a fine of 100 euros per excess tonne.

Under the EU's effort sharing regulation, member states together are to achieve an overall emissions reduction of 10 percent by 2020 and 30 percent by 2030, compared to 2005 levels. Countries are, however, required to contribute more or less depending on their relative wealth. This means that Germany has a much higher responsibility than for example Poland.

Germany's allocated emission reduction target is set at minus 14 percent by 2020 and minus 38 percent by 2030. The Effort Sharing Regulation also defines annual emission budgets (AEAs) for the years 2021-2030, following a linear reduction trajectory. Germany's climate targets and sectoral emissions budgets are based on this trajectory.

If a member state fails to comply with its annual emission reduction targets, it must come up with a “corrective action plan”. Ultimately, the shortfall may be multiplied by a factor of 1.08 and this penalty added to the following year's obligations. Failing to comply with its reduction targets could thus mean Germany having to buy emission allocations from other member states at a high cost.

As the EU has announced its Green Deal and pledged to become the world's first climate-neutral continent, discussions have also been initiated on whether the bloc will raise its 2030 target from -40 percent to between -50 and -55 percent compared to 1990 levels.

It looks likely that Germany will have to revise its 2030 target upwards as a result. Chancellor Angela Merkel has endorsed the proposal of increasing the EU's 2030 target, however adding that this would mean all member states having to raise their ambitions and that the bloc would need to negotiate distributions in the effort sharing scheme again.