Merkel May Double Price of CO2 Emissions to Win Support for Plan

(Bloomberg) -- Chancellor Angela Merkel’s $60 billion climate package is likely to be upgraded by parliament amid growing criticism that it’s too timid, according to people with direct knowledge of the government’s legislative strategy.

The price imposed on carbon-dioxide emissions from the heating and transport sectors could double from the current proposal of 10 euros a ton from 2021, in anticipation of expected challenges particularly from the opposition Green party, according to one person from Merkel’s party who asked not to be named.

“We will have to rework it,” the parliamentary whip from Merkel’s Christian Democratic Union, Michael Grosse-Broemer, told reporters in Berlin on Tuesday, specifically citing opposition from the Greens, who have leverage to block or slow the legislation in Germany’s upper house of parliament.

Environment Minister Svenja Schulze echoed the position, saying in an interview with the Funke media group on Wednesday that she would "impartially listen to" any improvements proposed in parliament.

Merkel flew to New York this week to present her government’s plan to reduce greenhouse-gas emissions at the United Nations’s climate week, though at home the plan was pilloried as insufficient to meet Germany’s obligations to the global Paris agreement. The package, including a carbon-pricing mechanism, taxes on airline tickets and reductions on train travel, was meant to put Europe’s largest economy back on track in fighting climate change.

Upon her return she defended the proposed carbon price, saying it was too early to know what actual impact the measures would have.

"We’ll have to see about that, and learn from it," Merkel said at a climate and technology conference sponsored by her Christian Democrat-led bloc in Berlin. "But what’s really important is that we took this first step."

The complex set of measures now needs to be approved by the lower house, or Bundestag, as well as the upper chamber, or Bundesrat. While Merkel’s coalition of her Christian Democrat-led bloc and the Social Democrats has a majority in the Bundestag, it lacks one in the Bundesrat, made up of representatives of the country’s 16 states. There, the Greens are represented in nine of the states.

The party, whose leaders called the climate draft a failure, will probably not block the package in the Bundesrat outright, according to a party official familiar with internal discussions. More likely it will try to force the legislation into mediating committees between the Bundestag and Bundesrat to secure changes. Greens co-leader Annalena Baerbock signaled action in the upper house this week.

“We Greens will do everything to put forward measures that are necessary to fight climate change,” Baerbock told Deutsche Presse-Agentur. “We’re in the opposition in the Bundestag, but in the Bundesrat we’ll continue to push our proposals for a genuine shift on transportation and an end to fossil-fueled combustion engines.”

One person in Merkel’s bloc said that the carbon pricing had intentionally been set so low in anticipation of negotiations with the Greens.

According to the original plan, CO2 emissions for transport and buildings will start at 10 euros a ton in two years and rise to 35 euros in 2025.

The landmark package also met with criticism among Social Democrats, the junior coalition partner. Karl Lauterbach, an SPD lawmaker and one of 14 candidates seeking to become the party’s new leader, called the carbon price “much too low, unfortunately utterly ineffective,” he tweeted on Sunday.

©2019 Bloomberg L.P.

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