(Bloomberg) -- Germany took a step toward introducing a sweeping levy on carbon-dioxide emissions to help recover lost ground on its international climate pledges.
A panel of government advisers appointed by Chancellor Angela Merkel recommended Germany either introduce a carbon-dioxide tax or extend the European Union’s Emissions Trading System to include the transport and heating sectors. The government should also work toward a 2030 deadline to include all sectors of the economy in the ETS, where polluters have to purchase permits to pump out carbon dioxide.
The panel recommended a carbon price of between 25 and 50 euros per ton under the trading system to discourage fossil-fuel use. Transport and heating account for about 40% of Germany’s greenhouse-gas emissions but aren’t yet covered by the EU’s carbon market.
Merkel has made it a priority this summer to get coalition backing for putting a price on the transport and heating industries. While Germany has cut emissions from power production, pollution from automobiles, trucks and aircraft remain stubbornly high.
“This moment offers the historic opportunity to transform the fragmented, expensive and inefficient German climate policy so that the price of CO2 is at the center,” said Christoph Schmidt, chairman of Merkel’s Council of Economic Experts.
Merkel, who as environment minister in the 1990s sketched some of the first international climate deals organized by the United Nations, in 2007 pledged to slash emissions 40% by 2020 from 1990 levels. The country is set to miss the target, senior ministers have said.
The chancellor faces a political tightrope walk to get the policy right. Polls and “Fridays for Future” demonstrations underline voters’ impatience with slow progress in hitting climate pledges. At the same time, any move to put new fiscal burdens on fossil transport and heating fuels may come with a political price for Merkel.
Her party of Christian Democrats faces three state elections from September in eastern German states where the populist Alternative for Deutschland party has made inroads and many thousands of people are employed at coal plants and mines. The AfD oppose Merkel’s timetable to pull out of coal achieved by consensus earlier this year. And hiking fuel and heating costs just as the economy begins to wobble may draw a backlash from the wider electorate too.
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