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Germany raises carbon tax entry level - climate gift of the year says Svebio

"Germany's Bundesrat has decided to significantly raise the level of carbon dioxide tax to be introduced by Germany in 2021. The decision means that within a few years, the EU's two strongest economies, Germany and France, will have a price on CO2 emissions EUR 50 per tonne. The decision applies to the entire economy so it includes heating and transport, not just heavy industry. It was a wonderful Christmas present, says Gustav Melin, CEO of the Swedish Bioenergy Association (Svebio).

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“Germany’s Bundesrat has decided to significantly raise the level of carbon dioxide tax to be introduced by Germany in 2021. The decision means that within a few years, the EU’s two strongest economies, Germany and France, will have a price on CO2 emissions EUR 50 per tonne. The decision applies to the entire economy so it includes heating and transport, not just heavy industry. It was a wonderful Christmas present, says Gustav Melin, CEO of the Swedish Bioenergy Association (Svebio).

On November 29, 2019, the National Emissions Trading System for Fuel Emissions Law (Brennstoffemissionshandelsgesetz – BEHG) was approved by the Bundesrat, the final instance. However, critics argued that the starting level of EUR 10 per tonne carbon dioxide (CO2) was too low.

On December 19, 2019, the Bundestag decided by a nearly two-thirds majority to back a parliamentary committee proposal to increase the original introductory price on CO2 emissions in sectors outside of the European Emissions Trading System (EU ETS).

The government’s original proposal was EUR 10 per tonne in 2021 rising to EUR 35 per tonne 2025. The new amended decision, passed by the Bundesrat on December 20, 2019, sets the starting price in 2021 at EUR 25 per tonne rising to EUR 55 per tonne in 2025. In addition, the passed legislation also reduces prices for rail travel and provides bigger rebates for commuters.

According to the Swedish Bioenergy Association (Svebio), the decision is a “clear signal” to investors and households that switching from fossil fuels to renewables and making energy efficiency improvements is more profitable. The decision heralds a major breakthrough for CO2 taxation in the EU.

It is one of the world’s biggest climate decisions this year. The cost of emissions will be high enough to drive the transition away from fossil fuels. A high price on carbon dioxide instead of subsidies and detailed rules gives an efficient climate policy. Then everyone can choose good solutions at a low cost, said Gustav Melin, CEO, Svebio.

France has already introduced a CO2 tax with a plan for incrementally raising the level. The French tax currently stands at around EUR 44.6 per tonne. Luxembourg also recently decided to introduce a CO2 tax at EUR 25 per tonne while Ireland increased its CO2 tax with EUR 6 to EUR 26 per tonne. As a comparison, EU emission allowances under the ETS are trading at around EUR 25 per tonne.

Sweden has the world’s highest carbon tax currently around EUR 115 per tonne, followed by Switzerland and Norway. The high Swedish carbon tax has, among other things, resulted in a dramatic 90 percent reduction of CO2 emissions from heating since it was introduced in 1991, according to the Swedish Environmental Protection Agency’s latest climate statistics.

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