CO₂ price debate gathers speed within German grand coalition

More and more politicians from German Chancellor Angela Merkel’s grand coalition are showing openness to the idea of introducing a price on CO₂ and have entered a debate about its possible form and details, writes Konrad Schuller in Frankfurter Allgemeine Sonntagszeitung. While economy minister Peter Altmaier had long insisted the concept was not on the government’s agenda for this legislative period, a source said his ministry “expects that CO₂ pricing will be introduced in some form or other”, writes Schuller. Several Conservatives from Merkel’s CDU and its CSU sister party have proposed setting up emissions trading for the transport and buildings sectors instead of a CO₂ tax, writes Schuller.

However, current EU legislation stands in the way of extending the European Union’s Emissions Trading System (ETS) to other sectors, Jochen Flasbarth, state secretary in the environment ministry, told Tagesspiegel in a separate article. The relevant EU directive would have to be amended, which would be very complicated politically, said Flasbarth.

A majority of companies from the energy efficiency industry are in favour of a CO₂ price in the buildings sector, said the German Industry Initiative for Energy Efficiency (DENEFF) in a press release. However, the government has to make sure such a price will actually help steer investment decisions and that it is flanked by other climate action measures.

German politicians have long shied away from introducing what tabloids have already dubbed “yet another tax hammer” for fear of angering voters, and protests against fuel prices in France have made them even less courageous. However, Germany is under pressure to meet the country's goal of cutting greenhouse gas emissions by 55 percent by 2030, and Merkel’s government promised in its coalition agreement to introduce legislation by the end of 2019 to make sure the country reaches its climate targets. Social Democratic environment minister Svenja Schulze – who has long called for a CO₂ price – presented a Climate Action Law draft in mid-February. It does not include a proposal on CO₂ pricing and was met with criticism from its CDU/CSU coalition partner as it aims to enshrine existing CO₂ reduction targets for each economic sector into law and hold the individual ministries financially responsible. To end the deadlock within the government, Merkel has set up the so-called climate cabinet, a round of ministers with key responsibilities related to climate issues, to come up with climate action proposals by the end of the year. This has put the concept of CO₂ pricing back on the table. Merkel said the climate cabinet would discuss it as one alternative of climate action and make a decision by the end of the year. There are many ways a price on carbon could be implemented, and different stakeholders favour different models, such as a cap-and-trade approach or a carbon tax. Several ministries have commissioned studies to define the design of such a scheme. Last week, politicians started to pitch ideas for the design of CO₂ pricing in Germany.