Germany pushes for ambitious climate policy

Germany's economy and energy minister Peter Altmaier today called for a cross-sector, bipartisan alliance for an ambitious climate policy, suggesting a range of measures at German and EU level, including CO2 tenders and carbon contracts for difference.

Policymakers must now give tackling climate change the highest priority, Altmaier said. At the same time, Germany's business sector, and society as a whole, must be supported in understanding the necessity for the transformation, and be given the means to carry out the necessary measures.

"We are heading for a catastrophe. And we've known this for three decades," Altmaier said. He admitted that tackling climate change had in the past been repeatedly pushed to the background as policymakers addressed "seemingly" more serious crises.

Altmaier presented 20 "concrete proposals" aimed at tackling climate change while at the same time strengthening the economic power of Germany and Europe, not least as a showcase for the rest of the world.

The proposals will look at market-based solutions as much as possible, to lower costs and "accelerate the transformation", Altmaier said, with the EU's emissions trading system (ETS) and Germany's CO2 pricing system to be reformed accordingly.

The two houses of parliament (Bundestag and Bundesrat) must before the next federal elections pass a bipartisan "charter for climate neutrality and economic power", which will be open to federal states, municipalities, social organisations and companies.

The charter will codify the target of climate neutrality by 2050 at the latest. The years between 2022 and 2050 will be given concrete reduction targets, taking into account the pending decisions of the EU on the 2030 greenhouse gas reduction targets. The charter will also oblige public bodies at federal, state and municipal level to reach climate neutrality by 2035.

The charter will legally oblige government agencies to take "necessary and suitable" measures to ensure that climate targets are reached, and economic strength is safeguarded, including through compensating for competitive disadvantages. And it will state that a certain percentage of GDP be set aside annually for tackling climate change and boosting the economy.

Under the proposals, sectors and companies will be able to commit themselves to a quicker transformation process through so-called "carbon contracts for difference". The quicker the transformation process, the higher the investment grants.

And the government will look into the possibility of introducing CO2 tenders. Companies and other interested parties would place bids on the price at which they are prepared to reduce a certain amount of CO2.

A "matching mechanism" will be put in place to ensure companies have sufficient renewable power, renewable heat and green hydrogen at their disposal. Germany's renewable energies law (EEG) will be reformed and adapted to new EU targets, and could eventually be transformed into a European instrument, which could significantly push the electricity transformation throughout Europe.

A decision will be taken by early 2021 on how to avoid disadvantages for green, carbon-low or carbon-neutral products on the global market, and the advantages of border adjustment mechanisms or compensatory levies will be assessed.

Germany plans to set up a number of groups to support its climate action, including an international "Climate University", a national, bipartisan "Climate and Business" foundation, a "House of the Energy Transition", and a "Climate and Business Council" within Germany's economy and energy ministry, which will advise the federal government on the transformation. It also called for the EU to set up an international "Climate global" agency, with the aim of publicising and implementing successful climate protection measures around the world.

The proposals will be reflected in "concrete regulations and proposals" in the next few months, to ensure that they are in place well before next year's federal elections in September, Altmaier said.

The Potsdam Institute for Climate Impact Research PIK chief economist Ottmar Edenhofer commended Altmaier's proposals as "remarkable", in particular regarding the pledge for a CO2 price as "lead instrument" of climate policy. The EU ETS must be rapidly reformed, Edenhofer said, in particular through the introduction of a minimum price. And Germany's CO2 pricing system for the heating and transport sectors must be rapidly integrated in the EU ETS, Edenhofer said.

Energy and water association BDEW also welcomed the "interesting and remarkable proposals". But BDEW managing director Kerstin Andreae said the government had just missed an opportunity to strongly boost renewable power growth, in the EEG draft amendment recently finalised by Altmaier's ministry.

By Chloe Jardine