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Germany envoys conclude coalition deal that raises 2030 climate ambition

09 February 2018 | Markets

German negotiators concluded a coalition deal on Wednesday that raises the country’s domestic climate ambition for 2030 and could bring to an end to five months of political uncertainty in Europe’s biggest emitter and economy.

The agreement largely matches a provisional agreement struck on Jan. 12 by senior members of Chancellor Angela Merkel’s centre-right CDU/CSU alliance and the centre-left SPD following the inconclusive Sep. 2017 general election.

The deal still needs to be endorsed by Mar. 4 by the SPD’s 450,000 members, many of whom are dissatisfied with their leadership again forming a coalition that has been in place since 2013 and allows Merkel to stay in power.

The agreement involves holding auctions for an additional 8 GW of renewable capacity by 2020, intended to result in getting Germany 8-10 million tonnes in CO2 cuts to close the gap to the country’s 2020 domestic emission goal of a 40% cut on 1990 levels.

While the long-standing 2020 (-40%), 2030 (-55%) and 2050 (up to -95%) domestic emission goals have been reaffirmed, the deal aims to close the gap to the 2020 goal “as quickly as possible” while writing law to ensure the 2030 goal is met.

The deal instead reiterated a commitment from the previous government to pass into law in 2019 a coal phase-out strategy that includes a predetermined end date. 

A special commission consisting of representatives of the affected industries, labour unions, the federal states, local authorities and environmental organisations are to begin work on the plan as soon as possible and present its results by the end of this year.

MORE AMBITIOUS

The main increase on ambition is a 65% renewable power share target for 2030, up from a previous 50% target and enough to knock €1.40 off average EUA prices next decade due to the resulting loss of demand from thermal power generators, according to Thomson Reuters analysts.

EUA prices were largely unmoved by news of the deal on Wednesday, though they had previously jumped higher as details emerged over the preceding weeks.

This is despite the fundamentally bearish nature of its elements, though some market participants said this may have reflected the overall higher priority the new government would give to climate protection issues that could also mean Germany pushes harder for more ambitious EU ETS reforms in future.

MARKET FOCUS

The deal itself was silent on any potential collaboration with France on minimum CO2 prices for the power sector, contrary to earlier drafts that had sketched out potential exploration of the issue.

Instead, the agreement reaffirmed the previous government’s view that the EU ETS should be the “leading principle” for carbon pricing and form the basis of linked markets worldwide.

“Our goal is a carbon pricing system that aims at being effective globally, but at least encompasses the G20 states,” the deal said.

 

 

Source: Carbon Pulse