Raising carbon price could help lower German renewables levy to 2.5 cents – think tank
Clean Energy Wire
The proposal by Christian Social (CSU) parliamentary group head Alexander Dobrindt to raise Germany’s CO2 price for transport and heating fuels to 45 euros in 2022 would allow for the government to significantly lower the renewables levy, said energy think tank Agora Energiewende* in a blog post. The Renewable Energy Act (EEG) surcharge – a levy to help finance renewables expansion and paid by consumers with their power bill – could already decrease to less than four cents per kilowatt hour (ct/kWh) as the government has promised to use existing CO2 price revenues to reduce it, and rising wholesale power prices also have a lowering effect on the surcharge. If all additional revenues from an even higher CO2 price (approximately 4.5 billion euros) are used to lower the levy, it could decrease to 2.5 ct/kWh from the current 6.5 ct/kWh, says Agora. This would constitute a “liberating stroke for climate action,” writes the think tank. It adds that weighing rising wholesale prices against the lower levy, household power prices would be reduced by about three ct/kWh.
The renewables levy makes up about a fifth of German household power prices. As the government aims to promote climate-friendly solutions versus those based on fossil fuels, it is looking for ways to lower power prices, as Germany’s power mix is increasingly based on renewables. In 2020, about 45 percent of electricity in Germany was produced with renewables. The government introduced a carbon price on transport and heating fuels this year. Many parties call for it to be raised quicker than planned, as Germany increases its climate targets.
*Like Clean Energy Wire, Agora Energiewende is funded by Stiftung Mercator and the European Climate Foundation.