The academic debate on climate policies often portrays Germany as one of the most successful cases. Despite its federal system of joint decision-making, most studies of German climate policy focus primarily upon activities at the national level while disregarding the heterogeneous economic interests and veto options of the Lander. Using the cases on renewable energy policy and emission trading, we analyze the subnational interests and institutional mechanisms that shape the intergovernmental negotiations and policy outcomes within the federated system. The cases confirm assumptions made by general research on German federalism, according to which strategies for the externalization and compensation of costs are of particular importance for redistributive policies, and the EU plays a major role in dissalving potential barriers to the process of federal policy formation. Contrary to the reservations often expressed, we demonstrate that climate policies have led to an increased economic and political competition between the Lander and have supported effective solutions. However, recent shortfalls in the effectiveness of emission trading and in the cost-efficiency of renewable energy policies indicate that redistributive conflicts in the allocation of greenhouse gas emissions have to be addressed more systematically within the German (and the European) system(s) of joint decision-making. (C) 2014 Elsevier Ltd. All rights reserved.