Germany’s re-elected Chancellor Angela Merkel has voiced support for European Union plans to prop up carbon price in the bloc’s troubled Emissions Trading Scheme (ETS).
Under the plan the EU would temporarily remove some of the surplus allowances weighing on the ETS that is meant to fight climate change.
Reuters Newsagency reports German support for the plan to withdraw 900 million permits, a process known as back-loading, is needed for a law to pass.
The proposal has been stalled for months as Berlin withheld its backing due to differences within Chancellor Merkel’s outgoing centre-right government.
Although there is added uncertainty over German policy as Ms Merkel tries to form a new coalition following last month’s election, the carbon and power markets both rose in expectation that her stance made back-loading more likely.
“We need a degree of back-loading of CO2 emissions so that the certificate price can reach a reasonable level again,” Chancellor Merkel told a union event in the city of Hanover.
She said a rise in certificate prices would help modern, flexible gas-fired power stations which were now struggling to compete with coal-fired plants, which emit many more carbon emissions, because carbon permit prices were now so low.
The EU benchmark carbon price was up nearly eight per cent at €5.35 a tonne, after Ms Merkel spoke.
Chancellor Merkel’s comments and the resulting rise in carbon prices, which raises electricity generation costs, affected the German wholesale power market, where contracts for base load (24 hours) delivery in 2014 rose around two per cent to €38.10 per megawatt hour.
Reuters reports the European Commission plan to withdraw carbon permits from its ETS is aimed at lifting prices depressed by over-supply and an economic downturn.
Lithuania, which holds the EU presidency, said it was confident the plan would proceed soon after “optimistic signals” from member states at a ministerial meeting.
German environment minister Peter Altmaier said that Germany was finalising its position on back-loading, implying the government could adopt a formal view before it leaves office.
Mr Altmaier, a member of Chancellor Merkel’s conservatives, has long voiced support for the proposals but Germany’s economy minister, a member of Ms Merkel’s junior coalition partner which was voted out of parliament in the September election, had opposed them.
The two ministers were jointly responsible for energy policy and the departure of the pro-business Free Democrats (FPD) is likely to make it easier for Chancellor Merkel to support back-loading.
Reuters reports in Hanover, Chancellor Merkel also said Europe needed a carbon dioxide (CO2) reduction goal for 2030.
“Without such a European goal there will be no investment in power stations in the future because nobody will know exactly how it will develop,” she said.
EU regulators are considering doubling the bloc’s target to cut greenhouse gas emissions by 2030 and setting a tougher binding goal for renewable energy use, EU sources said in September.
The Commission, the EU executive, outlined new targets earlier this year but has yet to make a firm legislative proposal.
Chancellor Merkel reiterated that amending Germany’s renewable energy law, aimed at boosting green power, will be a priority for a third term but that German industry had to be protected.
“We need clean, safe but also affordable energy. We want to expand renewable energy but it must happen in such a way as not to put at risk Germany’s industrial position.”
She faces a delicate balancing act to reduce incentives for green energy sufficiently to lower electricity costs while keeping up the renewable enrgy boom in Europe’s biggest economy.
