Merkel Plans Broad Emissions Levy in Last Major Climate Push

(Bloomberg) — Germany took a step toward introducing a sweeping levy on carbon-dioxide emissions to help recover lost ground on its international climate pledges.A panel of government advisers appointed by Chancellor Angela Merkel recommended Germany either introduce a carbon-dioxide tax or extend the European Union’s Emissions Trading System to include the transport and heating sectors. The government should also work toward a 2030 deadline to include all sectors of the economy in the ETS, where polluters have to purchase permits to pump out carbon dioxide.The panel recommended a carbon price of between 25 and 50 euros per ton under the trading system to discourage fossil-fuel use. Transport and heating account for about 40% of Germany’s greenhouse-gas emissions but aren’t yet covered by the EU’s carbon market.Merkel has made it a priority this summer to get coalition backing for putting a price on the transport and heating industries. While Germany has cut emissions from power production, pollution from automobiles, trucks and aircraft remain stubbornly high.“This moment offers the historic opportunity to transform the fragmented, expensive and inefficient German climate policy so that the price of CO2 is at the center,” said Christoph Schmidt, chairman of Merkel’s Council of Economic Experts.Merkel, who as environment minister in the 1990s sketched some of the first international climate deals organized by the United Nations, in 2007 pledged to slash emissions 40% by 2020 from 1990 levels. The country is set to miss the target, senior ministers have said.The chancellor faces a political tightrope walk to get the policy right. Polls and “Fridays for Future” demonstrations underline voters’ impatience with slow progress in hitting climate pledges. At the same time, any move to put new fiscal burdens on fossil transport and heating fuels may come with a political price for Merkel.Her party of Christian Democrats faces three state elections from September in eastern German states where the populist Alternative for Deutschland party has made inroads and many thousands of people are employed at coal plants and mines. The AfD oppose Merkel’s timetable to pull out of coal achieved by consensus earlier this year. And hiking fuel and heating costs just as the economy begins to wobble may draw a backlash from the wider electorate too.To contact the reporters on this story: William Wilkes in Frankfurt at wwilkes1@bloomberg.net;Brian Parkin in Berlin at bparkin@bloomberg.netTo contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Andrew Reierson, Rob VerdonckFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) — Chancellor Angela Merkel’s plan to make it more costly to pollute in Europe’s biggest economy will take another step forward on Friday when a panel of government advisers will present fresh proposals.

In what looks likely to be her last major contribution to Germany’s climate policy before stepping down in two year’s time, Merkel has made it a priority this summer to get coalition backing for putting a price on the transport and heating industries, sectors not covered by Europe’s emissions trading scheme. Together they represent more than a third of Germany’s greenhouse gases.

“Extreme weather events are becoming more frequent,” Merkel said in a Saturday podcast. Concerted action with wider pollution pricing needs to be agreed by the autumn, she said.

Germany has pledged to cut emissions by 55% by 2030, compared with 1990 levels. But by this year, the country had reduced CO2 output by only 30%.

Merkel faces immense risks to get the new policy right. Political polls and “Fridays for Future” demonstrations underline voters’ impatience with tardy progress in tackling climate pledges. At the same time, any move to put new fiscal burdens on fossil transport and heating fuels may come with a political price for Merkel.

Her party of Christian Democrats faces three state elections from September in eastern German states where the populist Alternative for Deutschland party have made inroads and many thousands of people are employed at coal plants and mines. The AfD oppose Merkel’s timetable to pull out of coal achieved by consensus earlier this year. And, hiking fuel and heating costs just as the economy begins to wobble may draw a backlash from the wider electorate too.

The policy options that will be outlined by the “Five Wise Ones” panel of economists on Friday mark an official start to cabinet deliberations on pricing CO2 that will roll on through the summer.

They join a raft of rival proposals from opposition parties, Merkel’s own Social Democrat allies, industry lobbies and think tanks that either champion the introduction of a new tax on transport and heating fuels, or the extension of the emissions trading scheme to those sectors.

Social Democrat Environment Minister Svenja Schulze favors a tax that can be raised annually and is linked to end-of-year rebates for less well-off consumers. Her stance is backed by think tanks including the DIW and the opposition Greens, who want to tax emissions in transport and heating at the equivalent cost of 40 euros per ton. That’s much higher than where permits are currently trading.

Beware of voter disgruntlement, Merkel’s CDU and its Bavarian Christian Social Union affiliate both reject the option of a new CO2 tax in favor of adjusting current fiscal instruments such as the transport fuel levy that raises about 60 billion euros annually.

Georg Nuesslein, a CSU lawmaker who’s helping frame caucus policy, backs extending a version of the European market to heating, gasoline and diesel, a proposal rejected by Schulze as too bureaucratic.

Merkel’s given no clue so far where she stands but does conspicuously avoid reference to the word “tax” in recent comments.

After receiving the panel’s proposals Friday, Merkel will summon a “Climate Cabinet” made up colleagues including the ministers for finance, for economy and energy and for the environment to thrash out proposals.

The group will meet on July 18, four times in August and plan to sign off on proposals on Sept. 20, according to an inter-ministerial document seen by Bloomberg.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net;William Wilkes in Frankfurt at wwilkes1@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Lars Paulsson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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