Germany rings in 2021 with CO2 tax, coal phase-out

Germany is aiming for a green start to 2021 by shutting down a coal-fired power plant and slapping a CO2 price on transport, but critics say the efforts aren't enough to combat climate change.

Germany rings in 2021 with CO2 tax, coal phase-out
Image: Ina Fassbender / AFP

The measures are the result of hard-fought compromises thrashed out by Chancellor Angela Merkel's right-left coalition government, and are key to Germany's transition away from polluting fossil fuels towards renewable energy.

From January 1, 2021 the government will charge 25 euros per tonne of carbon dioxide emissions released by the transport and heating sectors.

The price tag was raised from the government's initially proposed 10 euros per tonne – a number widely slammed as too low by Germany's Green party, environmentalists and scientists. The price will increase to 55 euros by 2025, and will be decided at auction from 2026. 

Germans will feel the difference at the pump with diesel and petrol set to become more expensive, while heating buildings will also cost more.

The government expects to raise 56.2 billion euros from companies buying the new carbon certificates or “pollution rights” over the next four years.

Also on Friday January 1, the 300-megawatt Niederaussem D unit power plant near Cologne, running on lignite (brown coal), became the first to close down as part of Germany's phaseout of coal by 2038.

Energy giant RWE, which has operated the plant since it was built in 1968, said decommissioning the facility — as required by Germany's 2020 coal exit law- was “a difficult step” that would lead to some 300 job losses.

Under the same legislation, several power plants fuelled by black or hard coal are going offline from January, taking a combined capacity of 4.7 gigawatts off the market.


But the flagship initiatives have drawn criticism. The 25 euro carbon price will not “make the necessary contribution” to helping Germany meet its commitments under the 2015 Paris climate pact, said Christiane Averbeck, director of the environmental group Climate Alliance

Germany aims to cut its greenhouse gas emissions by 55 percent from 1990 levels by 2030, and derive 65 percent of its electricity from renewables by then.

Averbeck said the carbon tax however allowed for too many exceptions for “entire branches of industry” and was pegged too low to really change behaviours.

Garzweiler open-cast mine. Image: Ina Fassbender / AFP

The Green Budget Germany (FOeS) think tank said that to avoid companies moving production abroad to dodge the carbon pricing, the government would have done better to incentivise climate-friendly investments instead.

The ADAC motoring association has calculated that petrol and diesel will now cost seven and eight cents more per litre respectively.

To ease the pain, the government will lower the so-called EEG surcharge Germans pay to fund the shift towards green energy. The lost income will be offset by the revenues generated from the C02 pricing.


Despite a green reputation abroad, Germany remains heavily reliant on dirty coal, partly because of Merkel's decision to abandon nuclear energy after the 2011 Fukushima disaster.

In the third quarter of 2020, just over half of the electricity produced in Europe's top economy came from non-renewables, with coal alone accounting for 26 percent.

Climate activists, including the youth-led Fridays for Future movement, have urged the government to speed up Germany's coal exit, saying the current timetable of closing all coal-fired plants by 2038 is not ambitious enough.

To their fury, the government has given special permission for North Rhine-Westphalia's huge open-cast Garzweiler coal mine to keep expanding over the coming years in order to fuel nearby power stations, causing the destruction of several villages in the process.

Environmentalists have also railed against the planned multi-billion-euro payouts set to flow to energy companies in compensation for the plant shutdowns, alongside 40 billion euros in government aid for regions that depend on mining and energy jobs.

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UPDATE: Greta Thunberg joins German climate strikes before vote ‘of a century’

Tens of thousands of climate activists including Greta Thunberg descended on German cities Friday ahead of the weekend general election to crank up the pressure on the candidates to succeed Angela Merkel.

UPDATE: Greta Thunberg joins German climate strikes before vote 'of a century'
Greta Thunberg and other climate activists in Berlin on Friday. Photo: picture alliance/dpa | Jörg Carstensen

Speaking at a rally in front of the Reichstag parliament building in the run-up to Sunday’s poll, Thunberg told cheering Fridays for Future youth supporters that they needed to hold Germany’s political leaders to account past election day.

“It is clearer than ever that no political party is doing close to enough… not even their proposed commitments are close to being in line with what would be needed to fulfil the Paris Agreement,” on curbing climate change, she said.

“Yes, we must vote, you must vote, but remember that voting only will not be enough. We must keep going into the streets.”

As Germany’s top parties hold final rallies ahead of Sunday’s vote, the Fridays for Future youth marches claim the political class has let down the younger generation.

“The political parties haven’t taken the climate catastrophe seriously enough,” Luisa Neubauer, who runs the group’s German chapter, said.

She said Germany, as one of the world’s top emitters of greenhouse gases, had an outsize responsibility to set an example, with time running out to reverse destructive trends.

“That is why we are calling this the election of a century,” she said.

The race has boiled down to a two-way contest between Social Democrat Olaf Scholz, the moderate finance minister, and Armin Laschet from Merkel’s conservative Christian Democrats.

Polls give Scholz a small lead of about 26 percent over Laschet at around 22 percent, with the candidate from the ecologist Greens, Annalena Baerbock, trailing in the mid-teens.

Despite the urgency of the climate issue for a majority of Germans, particularly in the aftermath of deadly floods in the west of the country in July, this has failed to translate into strong support for the relatively inexperienced Baerbock.

She told Die Welt newspaper that she hoped Friday’s rally would give her party “tailwinds” heading into the vote. “The next government has to be a climate government – that will only work with a strong Green party.”   

More than 400 “climate strikes” are planned across Germany, with the Swedish Thunberg, who inspired the movement, expected to speak outside the Reichstag parliament building.

Thousands gathered on the lawn there from late morning bearing signs reading “Climate now, homework later”, “It’s our future” and simply “Vote”.

“Climate is an important issue and if this continues things are going to get worse and worse,” 14-year-old pupil Louise Herr told AFP.

Gathering under the banners “We are young and need the world!” and “Everything for the climate”, the activists are arguing that “climate crisis is this century’s biggest problem”.

READ ALSO: Climate change made German floods ‘more likely and more intense’

 ‘Unfair burden’

The activists will be part of a global climate strike in more than 1,000 communities around the world, Fridays for Future said.

Their central demand is to limit the warming of the Earth to maximum 1.5 degrees Celsius (2.7 Fahrenheit) as laid out in the 2015 Paris climate accord.

The Paris agreement set a goal of reducing global warming by two degrees Celsius above pre-industrial levels with an aspiration to go further and cap the rise to 1.5 Celsius.

Despite Merkel’s vocal support of climate protection measures, Germany has repeatedly failed in recent years to meet its emission reduction targets under the pact.

In a landmark ruling in April, Germany’s constitutional court found the government’s plans to curb CO2 emissions “insufficient” to meet the targets of the Paris agreement and placed an “unfair burden” on future generations.

The Fridays for Future movement launched global school strikes more than two years ago arguing that time was running out to stop irreversible damage from the warming of the planet.

Demonstrators take to the streets in Berlin to call for urgent climate action. Photo: picture alliance/dpa/AP | Luca Bruno

In September 2019, it drew huge crowds in cities and towns around the world including 1.4 million protesters in Germany, according to organisers.

The outbreak of the coronavirus pandemic put the brakes on its weekly rallies but the election campaign in Europe’s top economy has revitalised the

“The climate crisis cannot be solved through party politics alone,” Thunberg told reporters ahead of her appearance in Berlin.

“We can’t just vote for change, we also have to be active democratic citizens and go out on the streets and demand action.”


Greens as junior partner?

Around 60.4 million Germans are called to the polls on Sunday and most voters cite climate protection among their top priorities.

All three leading parties have said they aim to implement a climate protection agenda if elected, with the Greens presenting the most ambitious package of measures.

However the Fridays for Future activists have said even the Greens’ official programme falls short of what is needed to stick to the 1.5 degree Celsius temperature rise.

The Greens want to end coal energy use by 2030 instead of the current 2038. They also want the production of combustion engine cars to end from the same year.

While the party is expected to fall far short of its ambition to win the election Sunday and place Baerbock in the chancellery, polls indicate it has a good chance of joining a ruling coalition as a junior partner under Scholz or Laschet.

By Deborah Cole