German news agency dpa reported Monday that a deal was reached after overnight talks to get a package of measures for tackling climate change through both houses of parliament. While Germany is part of an EU-wide carbon market for CO2 emissions from the energy sector and heavy industry, transport and heating are currently not included in that trading system.
Chancellor Angela Merkel's government had initially agreed on a starting price for CO2 emissions from transport and heating fuels of 10 euros ($11.13) per ton, but the environmentalist Green party, which holds key votes in the upper house of parliament, demanded it be set higher.
Dpa reported that the charge will begin at 25 euros of CO2, a price that economists say would be more effective in getting people to shift from fossil fuels to renewable energy. “The targeted price path could actually lead to a real reduction of greenhouse gas emissions,” said Ottmar Edenhofer, co-director of the Potsdam Institute for Climate Impact Research. “It is now close to what economic research has found to be economically effective carbon pricing.”
Edenhofer contrasted the national measure with what he described as the “weak outcome” of a recent U.N. climate meeting and noted that the revenue will be used to cut the cost of electricity, which is relatively high in Germany compared with the rest of Europe.
"Lowering these charges will benefit all citizens, and especially low-income households," he said. The Federation of German Industries warned that medium-sized businesses could be disadvantaged by the higher carbon price compared with competitors that don't have to pay such charges.
The agreement, which still needs to be approved by both houses of parliament this week, also foresees lowering value-added tax on rail tickets and greater tax relief for long-distance commuters. The upper house represents Germany's 16 state governments. Although the Greens are in opposition nationally, they are represented in several regional administrations.
German government spokesman Steffen Seibert declined to comment on the agreement until it is published.