Local utilities association calls for faster increase of CO2 price to avoid later “price shocks”

Germany’s local utilities association VKU has called for a more ambitious increase of the national carbon price for transport and heating fuels to avoid “price shocks” once the system switches from fixed prices to market prices by 2027, reports Jakob Schlandt in Tagesspiegel Background. A report commissioned by VKU says that there is the risk that currently planned fixed prices for the coming years “will not be able to stimulate target-compliant greenhouse gas reductions, neither within the current target framework, nor – or even more so – in a planned Green Deal world.” This could lead to price hikes from 2027 onwards, as the market balances demand with “abruptly extremely limited supply”. “Market prices of 300 euros are possible,” said VKU managing director Ingbert Liebing. To create planning security, the price path should be made more ambitious, says VKU without providing details, reports Tagesspiegel.

The government coalition introduced a carbon price for transport and heating fuels starting with 25 euros per tonne of CO2 this year – roughly translating into prices rising 7 cents per litre of petrol, 8 cents for diesel fuel. Current plans would see it rise to 55-65 euros per tonne of CO2 by 2026, but most parties have said a more ambitious path is necessary to reach new climate targets.