German cabinet agrees to CO2 price of 25 euros from January 2021

Germany’s cabinet agreed on Wednesday (20 May) on changes to the climate package launched last September, and it is now certain that from January 2021, a price of 25 euros per tonne of CO2 will apply in all sectors in Germany.

Originally, the German government’s proposal had envisioned an entry price of €10 per tonne, which was to rise to €35 by 2025. According to the new regulation, the price in 2025 will now be €55. From the following year, emission certificates with a price corridor of €55-65 per unit will be auctioned off.

The cabinet today confirmed an agreement from a working group of the mediation committee between the two chambers of the German legislature, the Bundesrat and the Bundestag. The last points of the climate package were discussed there in December, especially regarding tax issues.

In fact, the part of the law regulating the CO2 price had already passed through the Bundestag and Bundesrat. However, under pressure from the Greens, who had demanded a considerably higher price, a political compromise was reached and the price was raised afterwards.

The European Commission’s promised green recovery plan will focus on building renovation, renewables and hydrogen as well as clean mobility and the circular economy, according to a leaked working document obtained by EURACTIV.

After the decision, Environment Minister Svenja Schulze (SPD) announced on Twitter that climate protection would be the cheapest option with the increased CO2 price.

“Then, in the future, more people will choose the climate-friendly option the next time they buy a car or replace their heating system,” she also said in a press release.

To relieve the burden on citizens when fuel prices rise, the climate package includes a higher commuter allowance. In addition, the ministers today made an amendment to the Renewable Energy Sources Act, which will also reduce the levy for renewable electricity in equal measure to the revenue generated by the CO2 price.

With today’s changes, the price of a litre of petrol is expected to increase by seven cents from January and the price of a litre of diesel fuel by eight cents.

The COVID-19 crisis should strengthen Europe’s resolve to achieve the climate objectives of the Paris Agreement by triggering policies that maintain fossil fuel prices above a minimum level, French authorities have said.

EU also considering carbon price for all sectors

The cabinet’s decision also contains a reference to measures to protect German companies from foreign competition and to prevent so-called carbon leakage.

These are to be introduced one year earlier, as soon as 2021. Although some member states of the EU already have a levy on CO2, there is no uniform EU carbon price in the construction or transport sectors.

The Commission’s draft of the Green Deal hints at the expansion of the European Union Emissions Trading System (EU ETS). However, it only states that its application to maritime transport and possibly also to land transport and the building sector will be examined.

The European Parliament’s Environment Committee has already come out in favour of a carbon price in maritime transport.

Next year, the Commission is planning a revision of the current ETS rules, which should come into force from 2023. Commission President Ursula von der Leyen also advocates the introduction of a Europe-wide CO2 limit tax, which France, in particular, has been calling for for years.

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