EnBW calls for a cross-sector and socially acceptable minimum price for CO2

The Energiewende has almost ground to a halt. The expansion of wind energy is practically at a standstill, the mobility transition has not even got started and the climate targets for 2020 have been pushed far back into the future. “The situation is becoming urgent while the solutions are already on the table”, says EnBW CEO Frank Mastiaux. “Yet these solutions require courageous political decisions to be made and a clear commitment to the Energiewende.”

The Climate Action Plan of the German government sets ambitious targets for the energy industry and also for the transport and heating sectors. “The current debate about a cross-sector price for CO2 emissions is very welcome. Setting a price on greenhouse gases even outside of the European Emissions Trading System is long overdue”, explains Frank Mastiaux. Take heating as an example: A customer who uses electricity, which has been generated e.g. using gas, to run their heating already pays a surcharge for CO2 emissions today. These costs are included in the electricity price as part of the Emissions Trading System. However, a customer who uses natural gas directly for their heating does not pay any corresponding surcharge for CO2 emissions. “We therefore propose building on the experience gained from the existing system of energy taxation to bring in a mix of measures for introducing CO2 pricing into other sectors as well.”

EnBW calls for the following specific measures:

• The introduction of a CO2 levy on energy taxes in the transport and heating sectors. As is already the case for the energy sector and industry, CO2 emissions would then be subject to a cross-sector price.
• The setting of a national minimum price for CO2 emissions in the European Emissions Trading System with moderate increases in the price over time. This will provide all those involved with planning security, especially for the expansion of renewable energies. In concrete terms, this cross-sector minimum price should be set at 25 euros per tonne of CO2 (2020) and increase to 30 euros by 2025 and at least 40 euros by 2030.
• A fundamental reform of the fee structure for electricity: The additional income received by the government from the transport and heating sectors should be fully redistributed to consumers through reductions in the price of electricity, for instance via an almost complete abolition of electricity taxes.

“The model we favour is efficient, simple and will deliver results for climate protection in the short term. Setting up an additional emissions trading system for heating and transport – as is being called for by some people – will take too long. We need a solution now”, says the EnBW CEO. “Our proposal would place a moderately higher burden on all environmentally damaging energy sources.” Medium-sized industry would also benefit from the proposed abolition of electricity taxes. At the same time, we must find other ways to relieve the burden on and promote the use of climate friendly energies in industry.

It would also create an incentive for consumers to gradually switch over to more climate friendly technologies in the heating and transport sectors. Thanks to the “gentle” increase in the minimum price, consumers would have enough time to adjust their consumption patterns. For example, consumers who switch over to an electric car and install a heat pump for their heating would actually have a much lower financial burden under the proposed system.

The arguments put forward by EnBW have been supported by a recent report published by the energy industry consultancy company Connect Energy Economics in Berlin. The consultants came to the conclusion in their study that further developing CO2 pricing would result in an effective, socially acceptable and quick reduction in CO2 emissions. According to the consultants, the mix of a minimum price, sector coupling and lowering the burden on the price of electricity could “usher in a sustainable change that is socially acceptable and easy for both consumers and investors to plan for”.