More flexible German CO2 price would make it resilient to market turbulences – former govt advisor

A more flexible CO2 price would be beneficial for consumers and also make it harder for oil-exporting countries to undermine it, a former German government advisor has suggested. In a comment piece for Handelsblatt Peter Bofinger, economics professor at the University of Würzburg and a former member of the German Council of Economic Experts, said that CO2 pricing is necessary in the fight against climate change but that rigid prices do not “take into account that the world market prices for oil and gas do not represent competitive prices.” He suggested a flexible pricing system could help lessen inflation when the cost of crude oil rises dramatically, and also prevent oil-exporting countries such as Russia from undermining the CO2 price through lowering their own prices. According to Bofinger, the new system “could be introduced as early as the beginning of next year by suspending the planned increase of the CO2 price from 25 euros to 30 euros.”

The current price for super petrol represents a CO2 price of around 75 euros per tonne compared to late 2019 levels, the article said. The energy price hike across Europe in the second half of 2021 has led to worries that a quick rise in carbon pricing could add further pressure on customers already struggling to pay their energy bills, which is why the new government opted for sticking to a moderate growth path for the price agreed by the former coalition government under Angela Merkel.