Killing Coal Controversial – Proposed New Climate Levy Debated Among Ruling Political Parties, States and Utilities

Plans by German Energy Minister Sigmar Gabriel (SPD) to impose a new so-called climate levy (“Klimabeitrag”) for specific German power plants to squeeze them out of the market continue to spark controversy among and within the ruling political parties, the federal states and German utilities. The – most doubtful – legality of the levy is not being discussed much.

In March 2015 the Federal Ministry for Economic Affairs and Energy (BMWi) presented a key point paper that outlined plans contained in the “Action Programme on Climate Protection 2020″ adopted in December 2014. It suggested additional CO2 savings in the amount of  22 million tonnes up to 2020 by imposing a so-called Klimabeitrag (literally “climate contribution”) that would effectively stop production from certain thermal power plants. The climate levy would be a new tool to implement a politically desired exit from coal fired power plants. On 13 April, BMWi released further information on the proposal, including answers to questions from the parliamentary CDU/CSU group in the Bundestag and a presentation from advisors to the ministry.

It looks as if the levy shall be imposed as of 2017 on power plants older than 20 years and shall come on to top of the emission allowances power plant operators have to hand in under the European Emission Trading Scheme (EU ETS) (for more information on the climate levy and its exemptions, please see here). While EU ETS allowances currently trade at around EUR 7/t CO2, the new climate levy shall amount to EUR 18 to 20/t CO2.

Opposition against the levy which – at least at the beginning – would mainly have to be paid by the operators of older lignite-fired power plants, particularly comes from regions like North Rhine-Westphalia (NRW) where plants are located. According to Rheinische Post, a broad alliance of the ruling SPD party (the Social Democrats rule together with the Green Party), the conservative CDU (which is the main opposition party), unions and trade associations has formed. The alliance reportedly wrote to Minister Gabriel warning him of risks to the security of supply as German is also exiting nuclear power until 2022 and asking him to support highly-efficient combined heat and power plants to reach the German climate goals (the levy is justified by the alleged need to reach a 40% CO2 reduction goal by 2020). The states of Saxony and Saxony Anhalt (both CDU/SPD ruled) where German lignite mines are located also oppose the plans, the magazine Spiegel, points out.

Spiegel also highlights that there is strong opposition against the climate levy by the leaders of the parliamentary groups of the ruling conservative CDU and CSU parties (which form a grand coalition with the SPD). Yet other members like the representative for climate protection of the CDU/CSU parliamentary group supported the plan, Spiegel says.

There is also a rift among the utilities. Reportedly 75 municipal utilities have written to Minister Gabriel in support. They mainly operate gas-fired power plants that lately suffered more than older lignite-operated power plants from the fact that Germany supports renewable power plants with above market remuneration pursuant to the Renewable Energy Sources Act (EEG) and grants green power priority in the grids. This has lead to operators of modern gas-fired power plants announcing the closure of plants.

The unions IGBCE and ver.di have called for protests in Berlin this Saturday, warning that 100,000 jobs were in danger.

The legality of the proposed climate levy in its proposed form is most doubtful, on several European law and German constitutional law grounds. However, so far the debate is political, without much regard to legal questions.

Source: Rheinische Post; Spiegel

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