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Germany to raise carbon emission price to €25 per metric ton in 2021 after pressure, sources say

Reuters

Germany will raise the price for carbon dioxide emissions from transport and heating buildings to €25 ($27.56) per metric ton from 2021 after a proposed €10 price tag was criticized for being too low, government sources said on Monday.

The lower house of parliament last month approved a package to help Germany achieve its target of cutting greenhouse gas emissions to 55 percent of their 1990 level by 2030, but the opposition Greens, economists, business groups and activists rounded on its €10 a ton CO2 emissions price.

A deal on the higher price between federal government and states paved the way for the Bundesrat upper house of parliament to agree before Christmas to a reduction in VAT on state-owned rail operator Deutsche Bahn’s train tickets, the sources said.

Berlin wants to make rail travel cheaper to encourage people to take the train rather than the car or domestic flights.

A working group of a committee mediating between the upper and lower houses of parliament, which is meeting on Monday, still needs to approve the agreement by Wednesday. It would then have to be approved by the upper and lower houses on Friday.

Senior German conservative Armin Laschet said on Twitter: “The climate package blockade is over.”

The carbon price aims to make fossil fuels more expensive so that companies and citizens switch to climate-friendlier options.

Under the new agreement the carbon price would rise to €30 in 2022, €35 in 2023, €45 in 2024 and then €55 in 2025, while price corridor of €55 to €65 will apply for 2026, parliamentary and government sources told Reuters.

“VAT on train trips to fall, tax relief for commuters to rise and revenues from the higher CO2 price will all be used to reduce the EEG levy, reducing the burden for small and medium-sized companies and private households,” Laschet added.

The EEG levy is the fee consumers have to pay to support Germany’s shift toward renewable energy. And to compensate for raised petrol prices from the higher carbon price, commuters will get more tax relief, the sources said.

Holger Loesch, deputy managing director of Germany’s BDI industry association, said raising the carbon price threatened to drastically reduce Germany’s competitiveness.

“The compromise on the climate package makes it even more urgent to relieve the affected industrial companies of the CO2 price from day one to the same extent as the companies in the EU emissions trading system,” he said.

The German power sector and energy intensive industries such as aluminium are already covered by Europe’s Emissions Trading System, where benchmark carbon permits are currently trading around €25 a ton