LEAK: Germany backs carbon pricing extension in EU climate policy overhaul

The Reichstag building, seat of the German Parliament in Berlin. [Mummert-und-Ibold / Shutterstock]

The German government is backing an extension of European Union carbon pricing and an end to free carbon permits for airlines as the bloc prepares new measures to help meet climate change targets, according to a document obtained by EURACTIV.

The European Commission will propose a dozen climate policies on July 14, each designed to slash greenhouse gases faster in line with an EU goal to cut net emissions 55% by 2030 from 1990 levels.

The package will include reforms to the EU carbon market and a border levy to impose CO2 costs on imported goods. All the policies will need approval from EU governments and the European Parliament.

In a document detailing its position on the package, Germany backed the Commission’s plan to impose CO2 prices on transport and heating in buildings through a separate system to the EU’s existing carbon market.

“The long term goal should be to have a uniform cross-sector carbon price in the EU,” the document said.

EU carbon market will be extended to buildings and transport, von der Leyen confirms

Europe will apply its emissions trading scheme to buildings and transport, European Commission President Ursula von der Leyen told a summit of world leaders on Thursday (22 April), setting the stage for the EU’s planned overhaul of its carbon market.

Berlin this year imposed a national CO2 levy on suppliers of heating and transport fuels, set at an initial €25 per tonne.

However, the plan to take the system EU-wide is facing pushback from some EU governments and lawmakers, who fear it could hike household fuel bills.

Extra measures will be needed to ensure governments have enough resources to address the policy’s social impact – particularly on low-income households and for people who rent their homes, Germany said.

Brick Medak, head of Berlin office at climate think tank E3G, said the paper exposes divisions within the ruling majority over carbon pricing.

“This compromise clearly shows the different positions of the SPD and the Conservatives,” Medak said. “While Conservatives are, like Ursula von der Leyen recently, calling to include the buildings and transport sector into the existing ETS scheme the SPD is getting more and more sceptical about carbon pricing in general looking at its social implications,” he told EURACTIV in emailed comments.

Carbon pricing policies are also becoming a key topic for debate in the campaign for the September general election, Medak said. In this context, he said it was “good” that the German paper also speaks out against a carbon market-only approach and in favour of sector- and technology-specific measures alongside emissions trading.

“Emissions trading is not a silver bullet. The almost obsessive preoccupation with it in Germany is increasingly irritating many other EU countries,” Medak told EURACTIV.

In the leaked paper, Berlin also said the upcoming reforms to the EU carbon market should prolong free carbon permits “to an appropriate extent”, but end them soon for aviation.

The carbon market forces factories, power plants and airlines to buy permits when they pollute in the EU. Industry and airlines get some for free, shielding them from carbon prices that have soared to record highs this year.

Analysts have said that to comply with World Trade Organization (WTO) rules, the EU must phase out free permits when it introduces a carbon border levy on imported goods.

A leaked proposal for the border levy did not clarify whether that would happen.

A German government source declined to comment on the document’s contents.

> Read the full paper below or download here.

Stellungnahme_der_Bundesregierung_Fitfor55_FINAL leak

[Editing and additional reporting by Frédéric Simon]

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