German industry group calls for more flexible EU emissions trading, lower electricity taxes

The German Chambers of Industry and Commerce (DIHK) lobby group has called for ambitious reforms to Germany’s energy and climate policy to reduce cost pressure for companies. In a set of demands, DIHK lists four major areas for action, including a more flexible emissions reduction pathway in the EU’s emissions trading system (ETS). 

“Companies need time for the transition to climate neutrality, as new infrastructure for electricity, hydrogen and CO₂ is only now being built and causes high costs that weigh on competitiveness,” DIHK said. If costs for emissions allowances in the ETS are set too high, companies will anticipate market intervention, which undermines the system’s acceptance, the lobby group argued. A “realistic” target path should therefore be pursued when the new ETS2 is introduced for transport and heating in 2028. 

The ETS is a flagship EU mechanism that puts a price on emitting one tonne of carbon dioxide in specific sectors, thus incentivising climate friendly practices. Industry must hold a permit to emit CO2, and while most of these "allowances" are auctioned, a share is allocated free of charge to industry in international competition. The aim is to prevent companies from relocating production to countries with weaker climate policies to avoid high carbon costs. 

In addition to more flexibility, the DIHK proposed to use international climate projects “as a lever” for companies to reduce their carbon footprint in an “economically efficient” way. Companies supporting emission reduction projects outside Europe should be eligible for ETS allowances that acknowledge their commitment abroad, the group said. 

As a third step, the industry association said that faster electrification is currently being blocked for many companies by high electricity prices, which could be alleviated by lowering taxes and removing further levies and surcharges for industry, with the shortfall covered by taxpayers. In addition, leaner rules and uniform deadlines are needed to speed up grid connections, the organisation said. 

“The energy transition has come to a deadlock,” DIHK head Peter Adrian said. High prices, bureaucracy, detailed regulation, and uncertain infrastructure development progress were all hampering businesses’ ability to adapt to the transition. “We have to make the energy transition economically viable again to allow companies to invest,” Adrian said.

The EU is currently reassessing the ETS design, following widespread complaints from industry across many countries that the current design is weighing on their competitiveness at an economically challenging time. Environmental groups have criticised calls for allocating more allowances to companies and allowing them to use overseas climate projects to reduce their carbon footprint within the EU system, arguing that this would delay investments in clean technologies and ultimately put climate targets at risk.