02 Oct 2019, 13:53
Julian Wettengel

Economic institutes criticise German government’s climate package

Clean Energy Wire

In choosing to implement a carbon price for transport and buildings, the federal government has bet on the right instrument in its 2030 climate package, but the planned price for the years 2021-2025 “seems little ambitious,” states the Joint Economic Forecast, published by Germany’s leading economic institutes. The report’s contributors include the Kiel Institute for the World Economy (IfW) and the German Institute for Economic Research (DIW). The report argues that the planned price per tonne of CO2 emissions should be better aligned with prices in the existing EU emissions trading system (ETS), which covers the energy and industrial sectors. That would have the advantage of getting closer to the goal of a uniform EU-wide CO2 price, so that costs of avoiding emissions for all relevant sources can converge, the institutes write. This would make “many of the piecemeal provisions” of the climate package unnecessary. The institutes also say climate policy investments should not be interpreted as measures to bolster the economy, “because these have to be long-term and should not follow the more short-term ups and downs of the economy.” They add: “Climate policy requires today's generations to forego consumption in favour of investments in low-emission energy generation and transport infrastructure. The institutes recommend that an adequate, uniform price for CO2 be sought as a central instrument of climate policy.”

The joint semi-annual report, commissioned by the government, analyses the domestic and world economy. The institutes slashed their growth forecasts for Germany for this year and next, blaming weaker global demand for manufacturing goods and increased business uncertainty caused by trade disputes. The report was published less than two weeks after Chancellor Angela Merkel’s coalition government presented its climate action package. That package includes a pricing system for carbon emissions from transport and buildings, proposes a framework Climate Action Law and introduces a package of measures across many economic sectors to put the country back on track to meet its 2030 climate targets.

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