German experts report recommends CO2 price for cars, buildings

FRANKFURT (Reuters) - A report presented to Germany’s government on Friday said the transport and building sectors should be set carbon prices as penalties to incentivise savings in climate harming emissions, as Germany struggles to meet its 2030 environmental targets.

FILE PHOTO - Cars queue during traffic jam on the city highway A100 at rush hour in Berlin, Germany, November 14, 2018. Picture is taken on slow shutter speed. REUTERS/Fabrizio Bensch

European Union emissions trading (ETS) covers half of all polluting industries such as utilities, but not the two sectors whose CO2 output accounts for significant burdens on the environment, alongside areas such as agriculture and households.

Chancellor Angela Merkel’s cabinet is due to decide by September on how to deal with sectors whose contribution to climate protection is lagging behind.

Germany is otherwise due to miss targets to cut greenhouse gases emissions, of which CO2 is the main one, by 55% in 2030 over 1990, has only achieved less than 30% so far.

The German council of economic experts in a special report said a separate CO2 price for the two sectors should be established as a transitory instrument to integrate them into the ETS, either by setting up separate emissions trading systems for them, or by imposing CO2 taxes on them.

The ETS sets a common price on emissions allowances are distributed to polluters and can be freely traded.

Volumes of these certificates can be steered to bring about desirable outcomes for decarbonization efforts.

“The current debate offers the historic chance to transform the piecemeal, expensive and inefficient German climate policy in such a way that putting a price on CO2 becomes the focal point,” said the chairman of the council, Christoph Schmidt.

But in the view of the group, the car and building industries should not be subjected to additional national or sector-specific CO2 cutting targets - options that are being demanded by some environmental campaigners.

As for the tax option, chiefly hitting car fuels and heating oil, the experts said it would only work if targets were strict and monitored, and that voters should be assured it was used only to fund more carbon avoidance not to boost state budgets.

Also, “to create acceptance for CO2 prices, the revenues collected by the state should be redistributed,” they said.

This could be done, for example, by per-capita payments, to enable citizens to account for higher energy bills, or by lowering existing energy-related taxes that already burden German consumers heavily.

France saw fierce protests when it raised energy prices.

Reporting by Vera Eckert, editing by David Evans