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PIK/Phototek | Climate researcher and economist Ottmar Edenhofer

© PIK/Phototek | Climate researcher and economist Ottmar Edenhofer

Germany can use carbon pricing to deliver on climate

Climate researcher and economist Ottmar Edenhofer presents new possibilities for German climate policy

Germany is clearly failing to meet its own national climate goals. By 2020, CO2 emissions will be reduced by a maximum of 32 percent, compared to 1990 levels, as opposed to the desired 40 percent. “But it needn’t cost the earth to rescue the planet – there is an affordable option politics can pursue to protect people from climate damage: carbon pricing,” says economist and climate researcher Ottmar Edenhofer, professor at TU Berlin, director of the Potsdam Institute for Climate Impact Research and advisor to the so-called climate cabinet, convened by German Chancellor Angela Merkel to allow experts and ministers to discuss climate issues. The cabinet will meet on 20 September 2019 to decide on a packet of measures to achieve the 2030 climate goals. Ottmar Edenhofer sees a comprehensive, coordinated, and socially just pricing of CO2 emissions as crucial for the realignment of German climate politics.

“If we do not achieve 40 percent by 2030, Germany faces EU fines, perhaps running into billions of euros, as we would then have failed to meet our obligations towards our European neighbors,” says Ottmar Edenhofer. “Ultimately it is the taxpayer who has to pick up the bill. This is money that we should be investing elsewhere – in protecting future generations and our planet. If we fail in this, we will have to pay a much higher price in terms of climate damage.” There is now widespread dissatisfaction in many sections of society with the lack of progress. Edenhofer sees a real urgency for a change in climate policy and makes the case for a thoroughgoing carbon-pricing reform. 

He has calculated that a carbon tax is possible in Germany without financially burdening lower-income households. Many of these households would actually enjoy financial benefits. “The additional revenues generated by carbon pricing must be returned to the people by the state, honestly and fairly, whether in the form of a reduced electricity tax or a per capita climate pay-out. The bottom line is that families would have more money in their pockets.”

Modernizing instead of relocating – benefits for industry

Carbon pricing would also provide important benefits for industry and commerce and help open up new markets. CO2-free technologies would become more profitable and consequently more attractive. Equally important is the fact that carbon pricing enables investors to plan for the future, thus speeding up research into emission free technologies. This will create new jobs and encourage businesses to pursue cleaner production methods and to modernize their plants rather than relocate abroad. “The strength of carbon pricing is that it offers benefits for all sectors of the economy, irrespective of sector-specific technologies, making it a driver for change and innovation,” says Edenhofer. “This enables us to steer the direction progress takes.” 

Carbon pricing would also be a clear sign of commitment to the protection of our natural resources, which we place at risk by burning fossil fuels. Global warming needs to be restricted if we are to maintain control over extreme weather conditions, rising sea levels, and other environmental crises. “I therefore expect the climate cabinet to send a strong signal by finally undertaking a fair and socially just carbon pricing reform,” says Edenhofer. “This requires a minimum pricing of 35 to 70 euros to achieve a real effect; anything less would be merely symbolic. And we need a clear pricing strategy with an increase of ten percent per year until 2030 to enable our companies to plan effectively. It is time for Germany to deliver on climate. Our security and our natural heritage are at stake.”


TU Berlin 2019

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