Germany introduces new carbon tax

From next year, Germany will introduce a new carbon tax of EUR 25/t. The price will increase over the following years.

Following several years of political wrangling, a minimum price for carbon emissions will be introduced in Germany from the start of 2021. Initially, the new tax will affect only the heating and transport sectors, and from 1 January 2021 the price will be EUR 25/t. The tax is then expected to increase by EUR 5/year until it reaches EUR 55/t in 2026.

The deal comes after the German government had originally floated a minimum price of EUR 10/t. However, during negotiations with the individual states and the other parties in the Bundestag, it was considered unambitious, and today the government was able to unveil the new deal, which, among other things, means that the price of one litre of petrol will increase by around 7 euro cents. In return, the government will focus on ensuring cheaper train tickets in an attempt to reduce the country’s carbon emissions. Germany is the largest carbon emitter in the EU and has for some time been under pressure to introduce a carbon tax after several large European countries, including the United Kingdom and France, introduced similar schemes.

In presenting the plan, the government spokesperson explained that further details about the new scheme would be released later this year. The heating and transport sectors are not covered by the parallel pan-European carbon emissions allowance market.

Germany’s official ambition is for the country’s carbon emissions to drop by 55% by 2030 compared to the level from 1990. Earlier this year, details surrounding the decommissioning of German coal power plants were presented as another measure to bring the Germans closer to achieving this ambition.

In the middle of week 22, the European carbon emissions allowance price is at its highest level for around a month.