The German government has unveiled sweeping measures to combat climate change in Europe’s largest economy, including the introduction of a carbon price for key sectors such as transport and a €54bn spending package to encourage companies and households to reduce their carbon emissions.

The deal — agreed on Friday after a 15-hour negotiation that lasted into the early hours — is intended to send a strong political signal ahead of next week’s UN climate summit in New York. Political leaders in Berlin hope the measures and commitments will burnish Germany’s increasingly tarnished credentials as a global leader in the fight against climate change — and bolster Angela Merkel’s environmental record in the twilight years of her chancellorship. 

Ms Merkel and her colleagues hailed the agreement as a breakthrough, with environment minister Svenja Schulze describing it as a “new beginning for Germany’s climate policy”.

But there was sharp criticism from environmental groups and economists, who took aim in particular at the relatively low carbon price imposed by the government. 

Under the German proposal, companies that produce and sell petrol, coal, heating oil and similar fuels will have to buy certificates to offset the carbon dioxide emissions from their products. Such a system already exists at the European level, though only for heavy industry, aviation and the energy sector. The German carbon price, however, will be significantly lower than the current EU price, at least initially — starting at €10 per tonne in 2021 and rising to €35 by 2025. 

20 September 2019, Berlin: Activists stand on blocks of ice with ropes around their necks on gallows backdropped by the Brandenburg Gate during a protest calling for more action to help stop climate change. Photo: Tom Weller/dpa
Climate change protesters stand on blocks of ice with ropes around their necks on gallows erected in front of the Brandenburg Gate in Berlin on Friday © Tom Weller/dpa

Martin Kaiser, the director of Greenpeace Germany, described the price as “ridiculously low”, adding: “If you rely on such measures you might as well jump from an aeroplane with a plastic bag as a parachute.” 

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But Ms Merkel defended the new carbon price regime by highlighting the other measures adopted by the government, and pointing to the risk of a political backlash against reforms that will impact tens of millions of homeowners and motorists. “We have to bring the people along with us,” she said. 

Germany’s BDI industry federation gave a mixed reception to the climate package. Dieter Kempf, BDI president, praised the measures for “setting the course for efficient and sustainable climate protection”. But he also warned that companies were left with “uncertainty” about how rising electricity and gas prices would affect their competitiveness.

Once hailed as the “climate chancellor”, Ms Merkel’s green credentials have attracted critical scrutiny in recent years. Germany is in the process of phasing out both nuclear power and coal power, and has invested hundreds of billions of euros in the shift to renewable energy. Yet carbon emissions have barely fallen over the past decade, forcing the Merkel government to scrap its climate targets for 2020 after failing to cut emissions as much as initially promised. 

The package of measures agreed on Friday is intended to get Germany back on track, and to ensure that the country can meet its 2030 climate target to reduce carbon emissions by 55 per cent from 1990 levels. As part of the agreement, Berlin also formally commits itself to make the German economy carbon-neutral by 2050. 

The carbon price aside, Friday’s package included dozens of measures to encourage companies and households to reduce their carbon emissions: rail travel will be made cheaper by way of a cut in value added tax while plane tickets will be taxed more heavily; heating systems that run on oil will be banned from new buildings from 2026; vehicle taxes will be raised for heavily polluting cars, while electric vehicles will be treated more favourably. The government also set out a plan to install at least 1m charging points for electric vehicles across Germany by 2030. 

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Germany is the sixth-largest emitter of CO2 emissions in the world, accounting for about 2 per cent worldwide. 

Olaf Scholz, the German finance minister, stressed that the additional spending would be funded through tax revenues from measures such as the carbon price. There would be no need for extra borrowing or to abandon the government’s commitment to balanced budgets, he added.

Ms Merkel and her government have been under intense political pressure to step up their efforts in the fight against climate change in recent years, amid growing evidence that German voters see the issue as pivotal. A poll released by the ARD television channel on Friday showed that 63 per cent of German voters said they saw climate change policy as a greater political priority than economic growth. 

That sentiment has also been reflected in the recent electoral success of Germany’s Green party, which is polling at more than 20 per cent and has gradually eclipsed the Social Democrats as the leading party of the German left.

Via Financial Times