Germany's move to 'social-ecological' economy to focus on CO2 price and climate diplomacy

Germany will attempt to move towards a "social-ecological" market economy model that puts great emphasis on diplomacy to advance the global fight against rising temperatures and establishes CO2 pricing as a "central element of the future regulatory framework," the country's economy and climate ministry has said. In its annual report on the economy, the ministry calls for an "international (minimum) price for CO2”, for example via a climate club. The report says the government will reform the taxation system to make carbon pricing more effective, for example by abolishing climate-damaging subsidies and taxation rules. But a rising CO2 price must be accompanied by financial compensation to avoid undesired social effects, according to the report. "In order to further secure prosperity and competitiveness, economic recovery must go hand in hand with effective climate protection and sustainable progress," Green economy and climate minister Robert Habeck said. "This transformation is a historic challenge, but also a great opportunity."

The report says the "historic transformation" towards climate neutrality will require both technical developments as well as a shift away from today's economic model towards a "social-ecological" market economy. "This requires taking into account the interests of future generations systematically and reliably," it states, adding the government will complete a planned immediate climate action programme by the end of the year. The report also calls for adding new sustainability indicators to conventional data such as gross domestic product (GDP) to measure prosperity. "Starting this year, we will gradually develop the social market economy into a social-ecological market economy. The work in concrete terms has begun," Habeck said.