Germany Considers Minimum EU Carbon Price in Energy Policy Draft

06 May 2016 | Markets

Germany is proposing a minimum price on European carbon emissions, according to a draft document outlining the nation’s energy and climate policy through 2050.

The German government favors an emissions market that may “include the adoption of a Europe-wide minimum price to set a sufficiently strong price signal,” according to the document obtained by Bloomberg News. Chancellor Angela Merkel’s government plans to publish its policy recommendations in early summer. 

Germany’s proposal follows a push last week by French President Francois Hollande for a carbon-price corridor that would boost the cost of pollution and encourage investment in low-emission technologies. A glut of pollution permits in the European Union’s carbon trading system has pushed prices down almost 80 percent since 2008, eroding the penalty for burning coal, the most-polluting fossil fuel.

Energy Efficiency

Germany may introduce mandatory energy efficiency measures including financial incentives to boost the use of environmental-management systems, according to the document. The country’s environment ministry declined to comment on the document.

France’s proposal for a price corridor that rises over time attracted little attention among representatives of member states in a working group in Brussels, according to two people with knowledge of the talks. In the European Parliament, the European People’s Party, the biggest political group, decided not to raise the issue when it presented its position on emissions market reform Wednesday.

“When you launch such a system the floor price will become the formal price,” said Ivo Belet, the EPP lead lawmaker on the reform in the Parliament’s environment committee. “And that’s what we want to avoid.”

The Parliament and national governments started work last year on the draft law to adjust the carbon market to the EU’s climate goals through 2030. The legislative process may last around two years.

EU Climate and Energy Commissioner Miguel Arias Canete spoke against a minimum price last month, defending the current design of the ETS, which has no floors or ceilings. To reduce the glut, the EU decided last year to create in 2019 a market stability reserve to automatically control the supply of permits.

Source: Bloomberg