Politics

Carbon Tax

Overcoming Germany’s Climate Gap

A German electricity plant that should pay a carbon tax.

Source: Julian Stratenschulte/DPA

Despite a huge push toward adoption of renewable energy, Germany has a “climate gap.” The country has promised to cut greenhouse gas emissions by 40 percent by 2020 compared with emissions in 1990. But with the deadline just a few years away, the reduction in emissions was just 27 percent and emission levels have started to rise again.

A group of scientists want to address the climate gap by urging the government to replace its existing mixture of duties, levies and taxes with a single carbon price.

Handelsblatt has seen the experts’ four-page suggestion for guidelines for a new energy policy, prepared by 15 leading German energy experts. Its timing coincides with negotiations in Berlin to form a new government coalition that is likely to include the Green Party.

To achieve a meaningful climate policy, a new orientation is needed.

Andreas Kuhlmann
CEO, German Energy Agency

The Greens are expected to demand an end to coal-powered electricity production, but Chancellor Angela Merkel’s center-right Christian Democratic Party opposes this.

“The current system is leading to a dead end,” aid Andreas Kuhlman, a physicist who is CEO of the German Energy Agency. The agency gathers expertise on energy efficiency and renewables. “It is too complex, stifles innovation and has the wrong emphasis. “To achieve a meaningful climate policy, a new orientation is needed.”

The core of the paper is to put a charge on every use of hydrocarbons, arguing that this is the best way to avoid CO2 emissions. But the experts stressed that the point was not to raise money for the German government budget but to reduce pollution.

They suggested that the proposed carbon tax be “socially balanced,” reducing the charge for households with lower incomes.

The authors also criticized the European emissions trading system, which they said failed to steer energy users away from consumption. Part of the problem, they said, was that it covered only the energy and manufacturing sectors.

The group said that a carbon pricing system would have to be designed to minimize the impact on the competitiveness of individual companies and industrial areas of the country. But a uniform carbon tax would hurt some companies more than other.

“Germany can continue to be an economically successful pioneer of the global energy market in the future,” the experts said.

Germany has one of the highest uses of renewable energy in the developed world, thanks to a formal government program called the Energy Transition. In addition, a law called the Renewable Energy Sources Act provides for transitioning from a “feed-in tariff” system for renewables to an auction or competitive pricing system.

The generous feed-in tariffs helped Germany grow from producing 3.6 percent of electricity by renewable energy in 1990 to 31.6 percent in 2016. It was a remarkable feat for a country that has no great opportunities for wind or solar generation of electricity and which decided to abandon nuclear power as an alternative.

In 2015 the government proposed a climate tax designed to reduce CO2 emission from power stations by imposing a tax on coal-fired plants. But the administration backed down after worker protests.

The Agora Energy Transition project published a report this month that suggested that Germany would miss its 2020 CO2 reduction goals by a far larger margin than previously expected.

Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. Charles Wallace, an editor, adapted the story for Handelsblatt Global. To contact the author: stratmann@handelsblatt.com.