Germany will raise the price for carbon dioxide emissions from transport and heating buildings to €25 a tonne from 2021 after a proposed €10 price was criticised for being too low.
As a result of the decision by German politicians the starting price of the mechanism contained in the country’s so-called Climate Package is to be increased from €10 to €25 for the year 2021 and will gradually climb to €55 in 2025.
Additional revenues will be used to lower the power price, a document on the agreement said.
Reuters reports the lower house of parliament last month approved a package to help Germany achieve its target of cutting greenhouse gas emissions to 55 per cent of their 1990 level by 2030, but the opposition Greens Party, economists, business groups and activists rounded on its €10 a tonne CO2 emissions price
Energy industry, researchers and NGOs who had criticised previous plans as not ambitious enough welcomed the new deal, whereas chemical industry association VCI warned it could threaten the competitiveness of German companies.
Members of Germany’s national parliament and the federal and state governments found a compromise on contentious points from chancellor Angela Merkel’s climate package to resolve the issue.
Politicians agreed to raise the 2021 starting price in the country’s planned national CO2 pricing system for transport and buildings from €10 to €25, said a document from the talks seen by the German news outlet Clean Energy Wire.
Under the new agreement the carbon price would rise to €30 in 2022, €35 in 2023, €45 in 2024 and then €55 in 2025, while a price corridor of €55 to €65 will apply for 2026, parliamentary and government sources told Reuters.
Until now, a price of €35 was planned for 2025.
Additional revenues resulting from this increase over original plans will be used to lower the renewables levy consumers pay with their power bills, and to pay for a slight rise of the commuter’s allowance, said the agreement.
The agreement on CO2 pricing was reached by a working group set up by the mediation committee between the national parliament, the Bundestag, and the council of state governments.
The German Chemicals Industry Association (VCI) warned that the government should not forget businesses facing international competition.
“With the increase of the CO2 price from €10 to €25, the warning light for the competitiveness of SMEs in the chemical industry no longer flashes yellow but red,” said VCI managing director Wolfgang Große Entrup.
A deal on the higher price between federal government and states paved the way for the Bundesrat upper house of parliament to agree before Christmas to a reduction in VAT on state-owned rail operator Deutsche Bahn’s train tickets, the Reuters sources said.
Berlin wants to make rail travel cheaper to encourage people to take the train rather than the car or domestic flights.
A working group of a committee mediating between the upper and lower houses of parliament still needs to approve the agreement by Wednesday.
It would then have to be approved by the upper and lower houses on Friday.
Senior German conservative Armin Laschet said on Twitter: “The climate package blockade is over”.
The carbon price aims to make fossil fuels more expensive so that companies and citizens switch to climate-friendlier options.
“VAT on train trips to fall, tax relief for commuters to rise and revenues from the higher CO2 price will all be used to reduce the EEG levy, reducing the burden for small and medium-sized companies and private households,” Mr Laschet added.
The EEG levy is the fee consumers have to pay to support Germany’s shift toward renewable energy, and to compensate for raised petrol prices from the higher carbon price, commuters will get more tax relief, the sources said.
Holger Loesch, deputy managing director of Germany’s BDI industry association, said raising the carbon price threatened to drastically reduce Germany’s competitiveness.
“The compromise on the climate package makes it even more urgent to relieve the affected industrial companies of the CO2 price from day one to the same extent as the companies in the EU emissions trading system,” he said.
The German power sector and energy intensive industries such as aluminium are already covered by the Europe Union’s Emissions Trading System, where benchmark carbon permits are currently trading around €25 a tonne.
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