(Montel) Germany will launch a national emissions trading scheme for the transport and heat sectors from 2021, part of a swathe of climate policies the government announced on Friday following marathon negotiations within the coalition.
From 2026 the government plans to introduce a supply cap based on Germany’s emissions targets under EU rules for sectors that lie outside the existing EU carbon market.
The transport and heating sectors will then have a minimum carbon price of EUR 35/t and a ceiling of EUR 60/t.
Chancellor Angela Merkel described the result, which falls far short of the kinds of prices deemed necessary to incentivise change in the sectors, as a “classic compromise” between the demands of science and what people might tolerate.
“We start low to keep people on board…the compromise will still have a long-term effect.”
Though the CO2 price alone might not be enough to encourage these sectors’ swift decarbonisation, the “sum” of the government’s proposals should deliver the desired results, she added.
“We have not limited ourselves to one mechanism,” said finance minister Olaf Scholz, a senior member of Merkel’s junior coalition partners, the Social Democrats.
In addition to pricing carbon, the package of proposals would raise taxes on carbon-intensive activities and lower the cost of cleaner alternatives through incentive schemes, he added.
Energy sector changes
One of the notable measures directly impacting the energy industry announced on Friday included a commitment to push for a “moderate” minimum price on the EU carbon market.
Merkel described this as a “paradigm shift” in Germany’s historic attitude towards price-based reforms of the EU ETS versus supply-based reforms.
The coalition also agreed to slash Germany’s coal fleet to 17 GW by 2030 in line with the recommendations of a commission that proposed ending coal use by 2038.
The government additionally promised bigger auctions for solar and wind to guarantee 65% of power through renewables by 2030, as seen in a draft proposal by Montel on Thursday. A 52 GW cap on support for solar energy is also to be rescinded.
In terms of transport, the government agreed to roll out a million charging stations by 2030 and to support electric vehicles, targeting up to 10 million on the road by the end of next decade.
It also promised greater funding for public transport as well as greater CO2-focused taxation of vehicles.
The proposals also cover agriculture, another sector of the economy that has struggled to deliver emissions reductions since 1990.
Taken together the measures are supposed to ensure Germany cuts its emissions by 55% by 2030.
They would cost over EUR 40bn a year, though finance minister Scholz said he expected much of the required revenue to be recouped through higher carbon pricing.
Updates story published at 14:34 CET with details, quotes.