The German government will suspend the price increase of its domestic carbon price for one year as part of a €65 billion relief package meant to alleviate the strain of record-breaking energy prices.

The €65 billion burden relief package resulted from late-night talks within the German government and combines direct cash hand-outs with plans to siphon “windfall” profits from electricity generators. The suspension of the country’s iconic carbon price may be a tough pill to swallow for climate activists, though.

“Everyone had to go a long way [towards compromise],” explained Omid Nouripour, Germany’s Green party chief. The late-night negotiations had resulted in a one-year suspension of the carbon price, although Chancellor Olaf Scholz’s SPD demanded a two-year freeze.

In 2020, the government coalition of conservative CDU/CSU and the SPD agreed on a domestic carbon price on goods such as petrol, heating oil and gas, a politically unpopular measure yet to be agreed upon at the EU level despite ongoing negotiations.

The German carbon price started at €25 per tonne of CO2-equivalent emissions in 2021, increased to €30 and should have increased by €5 in 2023.

“This means that the previously planned follow-up steps in 2024 and 2025 will also be postponed by one year,” the German government said in a statement.

In all, the German carbon price will be delayed by an entire year, although experts question the merit of the measure.

“A bad signal for climate protection – the increase in the national CO2 price is postponed by one year,” said Brigitte Knopf, deputy chair of the German government’s independent climate protection advisory council.

Already, industry has seized on the perceived gap. Increasing the German carbon price should be “postponed until 2024,” German chemical industry association VCI demanded.

It also risks Germany’s climate leadership.

The German carbon price has been reflected in EU discussions on the merits of introducing a similar measure and has been adopted by Austria,

The move may weaken Germany’s credibility going into COP27, the annual climate change conference hosted in Egypt this year.

“This only brings a relief of 0.1 ct/kWh for gas (with an increase of ~ 25ct), but undermines credibility in climate protection,” Knopf warned.

Eastern Europe emboldened

With the EU energy minister set to meet on 9 September for an emergency council meeting in Brussels, the decision to freeze carbon price increase may also play into Eastern European hands, Poland’s among them.

Polish Prime Minister Mateusz Morawiecki has long been the most vocal proponent of reforming, read abolishing, the EU Emissions Trading Scheme (ETS), and seized the current energy crisis to call for the ETS to be frozen.

“The price increase is out of control and hitting the household budgets of EU citizens. It threatens the financial security of ordinary people, which has already suffered from the pandemic crisis,” Morawiecki wrote in a EURACTIV op-ed in January.

“Above all, it undermines citizens’ confidence in the EU’s climate policy concept,” he added.

Source: Εuractiv.com