Germany could face even higher billion-euro-bill for failing EU climate targets

As projections for Germany’s future greenhouse gas emissions have worsened, Germany might have to pay even more from its state budget to buy allocations from other countries if it does not manage to significantly lower its own emissions in the transport, buildings, and agriculture sectors, according to calculations undertaken by the Institute for Applied Ecology (Öko-Institut), reports energy and climate policy newsletter Tagesspiegel Background. For the years 2021-2030, Germany is projected to accumulate a deficit of about 380 million tonnes of CO₂ equivalents under the EU Effort Sharing Regulation, says Öko-Institut. “At an annual emissions allowance price of 100 euros per tonne, which the Öko-Institut assumed in earlier scenarios, the burden on the federal budget would rise from 30 to 38 billion euros,” writes Jakob Schlandt in the Tagesspiegel.

The EU Effort Sharing Regulation prescribes greenhouse gas emission reduction targets for 2021-2030 in economic sectors not covered by European emissions trade (EU ETS), such as transport, buildings and agriculture, for which each member state must reach annual reduction goals. In years when emissions are lower than the allocated amount, countries can bank surpluses and use them in later years. In years where emissions are above the annual limit, states must buy allowances from other countries. This makes climate action relevant to national budgets, and potentially expensive for countries that widely miss their targets, such as Germany. An EU Effort Sharing decision already prescribed annual goals for the years until 2020. Germany was able to bank surpluses until 2015 and use these for the following years to offset target breaches. 2019 is likely to be the first year for which the country will have to buy allocations from other European states, and the government has earmarked 300 million euros in the federal budget until 2022 to pay for these.