Strict CO2 pricing should be anchor of German climate policy - gov't advisor
The German Council of Economic Experts member Veronika Grimm has criticised Germany’s climate policy and called for a market-based approach that builds on the already existing Emissions Trading System (ETS), Tina Zeinlinger writes in financial weekly WirtschaftsWoche. The economist from the council which advises the government on economic issues released a study showing that Germany’s coal phase-out plan “is an economic and ecological disaster”, the article says. In order to meet Germany’s 2045 climate neutrality target, the government has adopted a host of measures, from investment incentives for green electricity producers to CO2 taxes and the gradual phase-out of coal-fired power generation. Many of these measures are associated with secondary effects, however, some of which counteract each other. “It is also unclear where all the green electricity will come from, which will be used to operate most machines, power cars and heat apartments by 2035,” Zeilinger writes. The ETS allows the government to determine how many tonnes of CO2 industries are allowed to emit in total. If Germany wants to achieve its climate goals, the federal government must "anchor CO2 pricing as a central control element across sectors and thereby make environmentally harmful economic activity more expensive”, she adds. Part of the plan calls for a sharp reduction in the number of EU ETS certificates and a significant price increase for CO2. Revenue generated from emissions trading would finance the expansion of renewables and "the coal phase-out will soon take care of itself - that saves nerves and money”, Grimm stresses.
The EU ETS has long been seen as inadequate in climate action, with low prices for CO2 emissions failing to trigger any move away from the use of fossil fuels. But a recent surge in emissions allowance prices has quickly made coal power much more expensive and led to companies bringing shutdowns forwards. Germany's Coal Exit Law, which grants compensation to operators and fixes a schedule for plant closures has been criticised for effectively extending the use of coal.