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Germany faces test of green credentials with new climate plan

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By Reuters
Germany faces test of green credentials with new climate plan

By Andreas Rinke and Paul Carrel

BERLIN (Reuters) – The German government prepared on Thursday for all-night talks on a new climate policy that will determine whether Berlin is serious about engineering a paradigm shift in Europe’s largest economy or simply wants to make a token show of going green.

The ruling coalition has set itself a Friday deadline to present a package of measures that are likely to include a carbon-pricing initiative to cap the use of fossil fuels in Germany, where the Greens party is enjoying a surge in support.

The plan may help Chancellor Angela Merkel’s conservatives and their Social Democrat (SPD) partners stem the Greens’ surge, but it risks piling more pressure onto industry at a time when the economy may already be in recession.

The key benchmark for judging the environmental success of the plan will be whether it effectively curbs emissions of carbon dioxide (CO2) through pricing, said Ottmar Edenhofer, director of the Potsdam Institute for Climate Impact Research.

“One could call it a success if tomorrow a credible reform of CO2 pricing is put on the table. If tomorrow we only get a clutter of subsidy programmes, then I would call it a failure,” Edenhofer told Reuters, adding that such initiatives generally had limited climate impact.

He said a new CO2 price must play a central role in the package, and that the government must commit to a transparent plan for a rising price corridor over the coming years.

“It (the price) must rise, otherwise we won’t be able to meet the reduction commitments from the European level,” Edenhofer added.

After two years ago scrapping as unachievable a self-imposed 2020 emissions cut target, the government is now scrambling to meet a commitment made to the European Union, of cutting carbon emissions by 55% compared to 1990 levels by 2030.

Two unusually hot summers and the chord struck among many young Germans by the climate activism of Swedish schoolgirl Greta Thunberg have added urgency to the government’s efforts.

With the economy slowing dramatically as a decade-long boom peters out, the government is also facing calls from economists to use the environmental challenge as a reason to spend heavily on a big climate plan after years of fiscal prudence.

So far, it has resisted that pressure, and is planning to stick to its balanced-budget policy.

Under the conservatives’ proposal, likely to be modified in horse-trading with the SPD, certificates would be issued granting wholesalers of fossil fuels the right to sell amounts above a cap equivalent to a yet-to-be-determined volume of carbon.

The wholesalers could trade the certificates among themselves, and the extra cost would eventually be borne by consumers. Friday’s meeting is expected to yield a roadmap. Concrete legislation is unlikely before later in the year.

The coalition parties hope that by channelling some of the proceeds of the emissions trading scheme to the public they can soften the blow from the higher prices they will have to pay.

Proposals include grants for electric car buyers, measures to expand a network of charging stations and incentives for households to move to more efficient heating systems.

(Writing by Paul Carrel; Editing by Catherine Evans)