German industry may have to initially pay twice for emissions with new CO₂ price

Germany’s new CO₂ price on transport and heating fuels, which goes into effect on 1 January 2021, could mean some companies initially pay twice for their emissions, robbing them of necessary capital until they are reimbursed months later, the Frankfurter Allgemeine Zeitung (FAZ) writes. Many companies will initially have to pay double for their CO₂ emissions: the new German CO2 price and the existing EU Emissions Trading System (EU ETS) costs. In the case of gas-fired steam boilers, for example, the energy source is likely to become more expensive even though the plant operator already has to purchase EU ETS certificates for the annual amount of CO2 emitted - a scenario that industry representatives warned against at an early stage and that the federal government had explicitly promised to avoid, according to the FAZ. In the first year and a half following the introduction of the new carbon price, the additional costs for German companies already covered by the EU ETS are likely to amount to around 2 billion euros, according to energy consultancy Enplify. The companies would be reimbursed for the additional burden, but only after submitting their annual emissions trading report in July of the following year, with the reimbursement only offsetting the payments for the past year. Enplify board member Dennis Becher said implementation of the new CO2 price could be catastrophic for many German companies. “It’s absurd that the federal government is aiming to help ailing companies with emergency liquidity aid and loans in the biggest economic crisis since the end of the Second World War, while at the same time withdrawing billions of euros in vital liquidity.”  Becher calls for companies to be pre-exempted.

The German government has decided to put a price on greenhouse gas emissions in the transport and building sectors from 2021 as a key instrument to help reach its climate targets. To pay Germany’s new CO₂ price, companies such as importers, wholesalers and refineries, will have to purchase emission allowances for the amount of fossil fuels they put on the market. The surcharge, which will be passed on to the end consumer, will make heating with oil and the use of petrol and diesel more expensive and is supposed lead to a wider adoption of renewable energy.