German coalition divided over carbon pricing

Time is of the essence. By September, the German government wants to agree a final draft of the country’s upcoming climate protection law. Until then, however, a few stumbling blocks still need to be cleared.

This is why Environment Minister Svenja Schulze of the Social Democratic Party (SPD) has been trying to accelerate things for several months now.

The German Climate Protection Regulation is on its way and is being evaluated by various German ministries – even without having first been approved by the Chancellery. Germany’s Environment Minister Svenja Schulze has thus anticipated the usual process. EURACTIV Germany reports.

In May, Schulze presented her own draft climate protection law – which was harshly rejected by the CDU – and sent it directly to the different ministries, effectively bypassing the usual procedure of submitting it to the Chancellor’s Office first.

Last Friday (5 July), Schulze followed up and substantiated her demand for a carbon price for non-ETS sectors, with three scientific reports. Her aim was to show how a carbon price can be introduced into the bill, without a tax being imposed on commuters, people in badly insulated buildings or poorer households.

Since then, the Christian Democrats and the Christian Social Union (CDU/CSU) has been sending very ambiguous signals. There is no agreement between members of the conservative union, as seen in the latest reaction of CDU party chief Annegret Kramp-Karrenbauer.

On Sunday (7 July), she cautiously spoke out in favour of a price on carbon.

“In the end, we will need a mix of regulatory measures, incentives, technology promotion and price control,” she said.

Germany needs a national climate consensus. After the summer break, the CDU wants to approach other parties and seek joint solutions, she added.

Two prominent think tanks in Germany presented a plan to help the country reach its EU climate targets for 2030. They serve as concrete proposals for Germany’s recently implemented climate cabinet, which is set to table its draft climate protection law by the summer. EURACTIV Germany reports.

The backdrop to this is rooted in the ‘Climate Dialogue’ announced by the CDU, which aims to have a debate and find an internal party line over the summer.

Concrete proposals are to be worked out before the climate protection law is tied up, which was a promise made in the coalition agreement.

German parties have different climate concepts

Some members of the conservative union are clearly in favour of a price on carbon to curb emissions from sectors that are currently not covered by the EU Emissions Trading Scheme – namely transport, buildings and agriculture.

The Prime Minister of North Rhine-Westphalia, Armin Laschet (CDU), said he considered it wrong to exclude a carbon price from the outset. The CDU is just as open as other parties, he said.

And a union of liberal CDU members, the so-called “Union of the Middle”, even presented its own climate concept at the start of June, which includes a CO2 pricing mechanism.

The Greens, who have long been demanding action to curb emissions from non-ETS sectors, presented their own concept and enshrined it in their “immediate climate protection programme” at the end of June.

The Greens want an entry price of €40 per tonne of CO2. In return, the electricity tax should be largely abolished and citizens should be paid off “energy money”, like in Switzerland, the Greens argue.

But Economy Minister Peter Altmaier (CDU) does not agree at all with those plans. According to him, Schulze’s proposal is insufficient “because it would burden many without sustainably reducing CO2 emissions.” For Altmaier, it is crucial that no jobs are lost and that rural areas are not disadvantaged.

Similar words were heard from the more economy-focused members of the conservative union. According to the leader of the pro-business wing of the CDU/CSU, Carsten Linnemann, a price on carbon has a “climate-political benefit that is questionable”.

He referred to the ‘gilets jaunes‘ protests that erupted in France as a result of an increase in fuel prices caused by the French carbon tax on petroleum products.

In Germany, calls for introducing a COemission tax are getting louder. Yet, the German government continues to be divided on the matter with the French ‘gilet jaunes’ appearing to be quite the deterrent. What would a socially acceptable price of CO2 look like? EURACTIV Germany reports.

Trading of CO2 certificates

So what is the alternative?

Many voices from the conservative union, including CDU Vice President Thomas Strobl and Joachim Pfeiffer, the economic policy spokesman for the CDU/CSU parliamentary group, demand that the existing EU emissions trading scheme (EU ETS) be extended to the fields of transport and buildings.

The liberal Free Democratic Party (FDP) is also calling for such an expansion of the ETS, but insists this must be done at EU level.

However, a pan-European reform of the EU ETS is likely to take years to materialise, Chancellor Angela Merkel recently told the Bundestag. Merkel is more in favour of a so-called “coalition of the willing”, with France and the Netherlands, for example. What is certain is that Merkel rejects a direct carbon tax.

Schulze is also getting headwind from her own ranks.

Although the majority of SPD members support Schulze, Finance Minister Olaf Scholz has so far been cautious and critical. Although the coalition agreement pledges not to increase taxes, Scholz calls for a carbon tax that will be compensated elsewhere so that it “doesn’t lead to any real additional burden for the people.”

Although Schulze will probably try and get Scholz on board, it will be up to Germany’s eight-member Climate Cabinet to decide whether or not to introduce a carbon pricing mechanism into the country’s draft Climate Protection Law.