Germany is considering the implementation of a minimum price on carbon emissions in Europe, as outlined in a draft document presenting the nation's energy and climate policy until 2050.
According to the document obtained by Bloomberg News, the German government supports an emissions market that could include the adoption of a Europe-wide minimum price to establish a stronger price signal. Chancellor Angela Merkel's administration plans to release its policy recommendations in early summer.
This proposal from Germany follows French President Francois Hollande's recent push for a carbon-price corridor aimed at increasing the cost of pollution and promoting investments in low-emission technologies. The oversupply of pollution permits in the European Union's carbon trading system has caused prices to plummet by nearly 80% since 2008, undermining the penalty for burning coal, which is the most polluting fossil fuel.
As a result of this news, benchmark carbon allowances experienced an increase of up to 5%, reaching €6.29 ($7.24) per metric ton on the ICE Futures Europe exchange in London, the highest level since April 29. In 2008, these contracts were traded at almost €30 per ton.
The draft document also suggests that Germany may introduce mandatory energy efficiency measures, including financial incentives, to promote the adoption of environmental-management systems.
The German environment ministry declined to comment on the document, while France's proposal for a rising price corridor did not receive significant attention during talks among member state representatives in Brussels. The European People's Party, the largest political group in the European Parliament, decided not to address the issue in their position on emissions market reform.
The legislative process for adjusting the carbon market to align with the EU's climate goals until 2030 began last year, involving the European Parliament and national governments. This process is expected to last approximately two years.
EU Climate and Energy Commissioner Miguel Arias Canete expressed opposition to a minimum price last month, defending the current design of the EU Emissions Trading System (ETS), which does not include price floors or ceilings. To address the oversupply issue, the EU decided last year to establish a market stability reserve in 2019 to automatically regulate the supply of permits.
