Merkel’s Key Climate Package Approved by German Lower House

(Bloomberg) --

Germany’s Bundestag approved legislation that boosts a levy on carbon pollution in response to pressure from environmental activists and utilities who decried the initial surcharge as too low to help stem global warming.

Lower house lawmakers secured a majority of 426 votes against 221 votes. The Greens joined Chancellor Angela Merkel’s Christian Democratic-led bloc and the Social Democrats, and will also ensure passage in the upper house, or Bundesrat, on Friday.

The compromise text modifies legislation approved in November. The Bundesrat, made up of officials from Germany’s 16 states, had demanded an overhaul, most importantly on the carbon levy.

Consumers in Europe’s biggest economy will now face a 25 euros ($27.84) a ton surcharge rather than the 10 euros a ton initially proposed. The pollution premium will rise to 55 euros by 2025, a jump of almost three-fifths from the original proposal.

Landmark

Carbon prices will be introduced from 2021. But the bulk of Merkel’s landmark effort to slash greenhouse gases over the next decade, will now go into effect at the start of 2020.

In addition to imposing costs on polluting activity with taxes on fuel prices and air travel, the legislation also reduces prices for rail travel and provides bigger rebates for commuters.

The states also won claim to 1.5 billion euros in tax revenue to help finance a broad array of measures from 2021.

Policy makers had joined the utilities lobby BDEW and World Wildlife Fund in demanding the cost of polluting be set closer to market prices, where carbon permits under the European Union’s emissions-trading system currently trade at about 24 euros a ton.

Merkel’s government had initially shied away from introducing higher carbon prices because of the risk of a political backlash from consumers facing higher gas and heating costs.

To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net;Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Raymond Colitt

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