CO -oriented energy pricing: Lessons from the German debate for the EU's smart sector-integration strategy - Part 3 of the Agora webinar series
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CO₂-oriented energy pricing: Lessons from the German debate for the EU's smart sector- integration strategy Part 3 of the Agora webinar series Andreas Graf, Thorsten Lenck BERLIN, 16 APRIL 2020
The European Commission will present a
Strategy for Smart Sector Integration by the end of the year
As part of the European Green Deal, the Commission will propose a Smart Sector Integration
Strategy, currently scheduled for Q2.
The aim of the strategy is to exploit the synergies enabled by an integrated energy system in order
to achieve a deep but also cost-effective decarbonisation of the economy.
Key opportunities identified by the Commission include:
• Electrification of sectors that currently still rely on fossil fuels.
• Replacing fossil-based gases and fuels by renewable and decarbonised gases and fuels.
• Making full use of circularity and the energy efficiency first principle.
For the next 3-4 weeks, the European Commission is seeking input from stakeholder. More
information on this public consultation can be found on the website of DG Energy.
16 April 2020 2CO2-oriented energy price reform is critical to the success of
smart sector integration in Europe
Five reasons for a CO2-oriented energy price reform in Europe:
1. Member States must significantly increase their efforts to achieve their 2030 non-ETS targets under
higher ambition
2. Efficient climate protection needs a CO2-price; this is currently missing across large parts of
transport, heat and agriculture and too unstable in the EU ETS
3. Key decarbonization options for heating and transport fall directly (CHP installations >20MW) or
indirectly (electric heat pumps and electric vehicles) under the EU ETS, while smaller CHP
installations, residential fossil fuel boilers and transport fuels are largely exempt.
4. Other forms of environmental & energy taxation for the non-ETS sectors also differ significantly
across Member States. Harmonized EU minimum-tax levels (defined by the Energy Taxation
Directive) do not take CO2-emissions into account. A reform of the ETD is currently being
considered.
5. Deflation of fossil fuel prices will keep the price of oil and gas low for the foreseeable future –
potentially slowing the energy transition in transport and buildings.
16 April 2020 EU ETS: European Emissions Trading System | CHP: Combined heat and power | ETD: Energy Taxation Directive 3Case Study: Levies and taxes in Germany
Why does Germany need a CO2-oriented energy price reform?
Taxes, levies and surcharges on electricity are high in
comparison to those placed on fossil fuels.
Energy-related regulated cost components for German households The decarbonization of the heat and transport
sectors requires – next to an increase in
25 VAT
23,0 energy efficiency – an increase in the
20 EEG-Surcharge consumption of wind and solar power in these
17,0 17,0
sectors, inter alia for:
Other levies
15
ct/kWh
CO2-Certificates ▪ Heat pumps (ambient heat) and
8,7
10 (≙ 20 €/EUA) power-to-heat installations
5,6
Concession Fee ▪ Electric mobility
5 2,7
0,7
Network charges ▪ Electricity-based synthetic fuels, aka e-
0 fuels (Power-to-Gas and Power-to-Liquid)
EV, PtX
Heating oil
Heat pump, PtX
Energy tax
Consumption
Natural gas
Diesel
Petrol
Electricity tax Taxes, levies and surcharges on electricity that
are 600% and 2000% higher compared to
natural gas and heating oil, respectively, and
200% and 300% higher than petrol and diesel,
Power Transport Heat
respectively, act as a significant economic
barrier to the electrification of heating and
transport.
Agora Energiewende (2018)
16 April 2020 5Germany has the highest electricity prices in the EU, but petrol
and diesel prices are at around the EU average…
Household electricity price in ct/kWh Petrol price in €/l Diesel price in €/l
Deutschland
Dänemark Italien Schweden
Belgien Griechenland Italien
Irland Dänemark Großbritannien
Portugal Portugal Frankreich
Spanien Schweden Finnland
Italien Frankreich Belgien
EU 28 Finnland Griechenland
Schweden Dänemark
Irland
Österreich Portugal
Zypern Belgien
Niederlande
Vereinigtes Königreich Großbritannien
Irland
Griechenland Deutschland
Estland
Liechtenstein Slowakei
Kroatien
Frankreich EU28 Zypern
Norwegen Kroatien EU 28
Luxemburg Estland Slowenien
Slowenien
Finnland
Malta Slowakei
Lettland Slowenien Deutschland
Niederlande Spanien Ungarn
Island Zypern Tschechien
Tschechische Rep. Lettland Rumänien
Polen Österreich Malta
Slowakei Tschechien
Spanien
Malta Österreich
Luxemburg
Estland Lettland
Ungarn
Rumänien Polen
Litauen Litauen
Kroatien
Ungarn Rumänien Bulgarien
Litauen Polen Luxemburg
Bulgarien Bulgarien
0,00 0,25 0,50 0,75 1,00 1,25 1,50
0 5 10 15 20 25 30 0 0,25 0,5 0,75 1 1,25 1,5
BMWi (2018) BMWi (2018) BMWi (2018)
16 April 2020 6…as are natural gas prices. For heating oil prices Germany is even
fifth to last on cost. The reason is: Levies and taxes have never been
related to CO2 emissions.
Household electricity price in ct/kWh Natural gas price in ct/kWh Heating oil price in €/l
Deutschland
Dänemark Schweden Dänemark
Belgien Dänemark Italien
Irland Niederlande Ungarn
Portugal Schweden
Spanien
Italien
Portugal
Italien Portugal
Niederlande
EU 28 Spanien
Griechenland
Schweden Österreich Malta
Österreich Frankreich
Zypern
Finnland
Irland Rumänien
Vereinigtes Königreich
Griechenland Deutschland Bulgarien
Liechtenstein EU 28 Slowenien
Frankreich Griechenland Frankreich
Norwegen Tschechische… EU 28
Luxemburg Slowenien Zypern
Slowenien
Belgien Estland
Finnland Polen
Lettland Vereinigtes…
Österreich
Niederlande Slowakei Spanien
Island Polen Tschechien
Tschechische Rep. Estland Kroatien
Polen
Luxemburg Lettland
Slowakei
Malta
Lettland Irland
Estland Litauen
Kroatien
2017 Deutschland
Belgien
Rumänien
Kroatien Ungarn (5.555 to Großbritannien
Ungarn Bulgarien Litauen
Litauen
Rumänien
55.555 kWh/a) Luxemburg
Bulgarien
0 2 4 6 8 10 12
0 5 10 15 20 25 30
BMWi (2018) BMWi (2018) BMWi (2018)
16 April 2020 7Germany’s future National Emissions Trading Scheme for
heating & transport – Key elements
CO2-price trajectory in the draft ‚Fuel Emissions Trading Law‘ (BEHG) What will be priced?: Transport and heating
fuels not covered by EU ETS
100 Who will be priced?: Companies that put
An additional decision is
fuels into circulation or suppliers of the fuels
CO2 price in €/Tonne CO2
required in order to extend or
80 ammend the price corridor (upstream approach) - government says this
65 Price ceiling means about 4,000 companies will participate
60 55
Introductory phase (2021 – 2025)
45 55 Price floor Surrender of certificates at fixed price with the
40 35 price rising annually by 5-10 Euro / Tonne CO2
30
25
Emissions trading within price corridor (2026)
20 Price set by market within pre-determined price
corridor of 55 - 65 Euro / Tonne CO2
0
2019 2021 20252026 2030 Price floor and optional ceiling (from 2027)
To continue the application of a price corridor
2021-2025: fixed price, as of 2026: price floor approach from 2027, the law will need to be
ammended in 2025.
Bundestag protocol declaration of the Federal Government of 19.12.2019
16 April 2020 8A CO2 price on energy carriers takes into account how much CO2 is
released in the combustion of fuels. For electricity and natural gas
the CO2 price can be indicated in typical sales units ct/kWh and for
petrol, diesel, heating oil in ct/l.
Converted into energy taxes (incl. 19% VAT)...
0,6 ct/kWh Natural Gas
…25 € per
7,0 ct/l Petrol
tonne of CO2
7,9 ct/l Diesel
8,0 ct/l Heating Oil
Agora Energiewende
16 April 2020 9Revenue recycling forseen in Germany‘s Climate Action
Programme 2030 (Mediation Committee Compromise)
1. A reduction of electricity costs through a reduction of the EEG-surcharge from 6,756 Cent/kWh
(2020) or potentially other electricity price components; Revenues from CO2-pricing will be largely
used to reduce the EEG-surcharge by;
0,25 Cent/kWh (2021)
0,5 Cent/kWh (2022)
0,625 Cent/kWh (2023)
2. An increase in a tax allowance for commuter‘s at travel distances higher than 21 km; by 5
Cent/km to 35 Cent/km (from 1.1.2021- 31.12.2026) and by an additional 3 Ct/km to 38 Ct/km from
2024 to 2026, financed by revenues from CO2-pricing.
3. An increase in the housing allowance by 10 % und reform of the rental laws to protect tenants
16 April 2020 10While an improvement, the effect of the CO2 price agreed upon
in Germany‘s Climate Action Programme 2030 is muted by the
overall size of existing taxes and levies.
State-induced price components at 35 State-induced price components at 55
Current state-induced price components
EUR/t CO2 on fossil fuels EUR/t CO2 on fossil fuels
EV, PtX
EV, PtX
EV, PtX
Heating oil
Heating oil
Heating oil
Heat pump, PtX
Heat pump, PtX
Heat pump, PtX
Consumption
Consumption
Consumption
Natural gas
Natural gas
Natural gas
Diesel
Diesel
Diesel
Petrol
Petrol
Petrol
Power Transport Heat Power Transport Heat Power Transport Heat
Network Concession CO2 CO2 Other EEG- VAT
BDEW, BMVI, BMWi, BNetzA, ÜNB, UBA, Agora Energiewende charges fee Surcharge
Contribution Certificates Surcharges
16 April 2020 * Assumes continued reduction of EEG-surcharge as foreseen in KSP 2030 relative to the CO2-Price 11Going one step further: rethinking taxes and levies for sector coupling
The “large proposal” harmonizes and systematizes levies and
the energy taxation over all energy carriers – every sector pays
its infrastructure costs plus a unified CO2 price
State induced energy price components with a
Status quo of the state induced energy price components CO2-contribution of 125 €/t
25 23,0 25
CO2-Certificate: 20€/EUA
20 20 CO2-Intensity of the electricity: 470 g/kWh
17,0 17,0 16,2
15 15
ct/kWh
ct/kWh
8,7 10,2 9,5 10,0 10,2
10
10
5,6
5 4,9
2,7 4,0
0,7 5
0
0
Diesel
Leichtes Heizöl
PtX
Verbrauch
Erdgas
Benzin
PtX
EV, PtX
Heating oil
pump, PtX
Consumption
gas
Diesel
Petrol
Verbrauch
Diesel
Verkehr E-Pkw, PtX
Erdgas
HeatWärmepumpe,
Heizöl
Benzin
EV, PtX
oil
pump, PtX
Consumption
gas
Diesel
VerkehrPetrol
E-Pkw,
Wärmepumpe,
Natural
Heating
Natural
Verkehr
Wärme Leichtes
Wärme
PtX
Strom
Heat
Wärme
Power Transport Wärme
Heat
Power Transport Heat
Network Concession CO2 - CO2 - Other EEG- VAT
BDEW, BMVI, BMWi, BNetzA, ÜNB, UBA, Agora Energiewende charges fee Surcharges Surcharge
Contribution Certificates
16 April 2020 13„Large“ Proposal: Electricity taxes, energy taxes and surcharges are
replaced by a CO2-contribution of 125 €/t on all energy sources. In addition,
petrol and diesel are charged a contribution for the financing of road
infrastructure; electricity and gas for their network infrastructure.
Impact of the harmonized infrastructure and CO2-pricing in the „large“ proposal in 2020 relative to the 2020 status quo
CO2-Contribution (Non-ETS) Federal Budget Impact:
with 125 €/t and a road Harmonized infrastructure and CO2-pricing
infrastructure contribution across all sectors
Electricity2: 1. Budget financing of all existing surcharges (EEG-, KWKG-,
4,9 ct/kWh 28,9 b. €
Revenue-neutral §19.2-StromNEV-, Offshore-Grid-, AblaV-Surcharge)
Natural Gas:
2,5 ct/kWh 2. Refinancing of the previous tax revenues from the electricity
20,9 b. € tax and energy taxes on petrol, diesel, heating oil and natural
Heating Oil: gas
55,7 b. €
33,3 ct/l
Petrol: 3. Financing the heat transition
29,4 ct/l
5,9 b. € 4. Transition fund for the financing of energy transition in private
Diesel: 33,2 ct/l households particularly impacted by the CO2-contribution
Infrastructure Contribution 5. Holistic financing of transport infrastructure, including the
29,5 b. €
(Petrol, Diesel): 42,0 ct/l mobility transition3
1) Steuer- und Beitragssätze für Haushaltskunden 3) zzgl. 7,2 Mrd. € LKW-Maut zur Deckung der
Agora Energiewende 2) 20 im EU-ETS angerechnet; CO2-Intensität des Stromverbrauchs: 470 g/kWh gesamten Wegekosten von 36,7 Mrd. €
16 April 2020 14Going one step further: rethinking CO2-oriented energy pricing in the EU context
A reform of the Energy Taxation Directive could allow for a
coordinated CO2-oriented energy taxation reform.
The EU Energy Taxation Directive of 2003 lays down rules for the taxation of energy products used
as motor or heating fuels and for electricity. Specifically it sets minimum levels of taxation and lays
down the conditions for applying tax exemptions and reductions.
The primary objective of the ETD is to support the proper functioning of the internal market
by avoiding double taxation and other distortions of trade and competition. Environmental protection
is currently still treated as a secondary objective. For example, no link exists between the
minimum tax rates of fuels and their energy content and CO2 emissions.
In principle, the Member States are free to apply excise duty rates above these minimum levels
of taxation, according to their own national needs and environmental ambitions.
All revenues from excise duties entirely go to the budget of the Member States.
A coordinated freezing of existing energy taxes and introduction of CO2-oriented energy taxation
according to a common price-trajectory could provide a harmonized European solution while
respecting Member State tax sovereignty, as well as existing systems and traditions.
16 April 2020 16European Commission President Ursula von der Leyen has
proposed extending the Emissions Trading System
“I will also propose to extend the Emissions Trading System to…cover traffic and construction. The
different systems have to converge by 2030 if we are to be climate neutral by 2050.”
Broadening the ETS to transport and heating may make sense for the time after 2030 due to
increasing sectoral integration:
With the growing uptake of EVs and heat pumps, an increasing share of transport and heating will
be covered by the EU ETS in its current scope.
Higher 2030 climate targets will lead to a weakening of the boundaries between the EU ETS and the
ESR, calling for new thinking on an effective EU climate framework for the period post-2030.
Expanding the EU ETS or linking separate trading schemes will not happen overnight:
An Agora Energiewende study on the legal, administrative, technical and procedural issues related
to expanding the scope of emissions trading concludes that there are no insurmountable barriers to
implementing the schemes. However, it is estimated that harmonizing a separate trading system
with different Member States or expanding the EU ETS will take 3-4 and 5-6 years, respectively.
16 April 2020 17Agora Energiewende T +49 (0)30 700 1435 - 000 Please subscribe to our newsletter via
Anna-Louisa-Karsch-Str.2 F +49 (0)30 700 1435 - 129 www.agora-energiewende.de
10178 Berlin www.twitter.com/AgoraEW
www.agora-energiewende.de
Thank you for
your attention!
Questions or Comments? Feel free to contact us:
Andreas.Graf@agora-energiewende.de
Thorsten.Lenck@agora-energiewende.de
Agora Energiewende is a joint initiative of the Mercator
Foundation and the European Climate Foundation.Backup
The CO2-Price component in the energy tax begins at the level
of the social cost of carbon (125 €/t CO2) – but then rises if the
sectoral targets for heat and transport are not met.
Development of the CO2-Price in the ‚Large‘ Proposal
250
Increase in the CO2-Price by 10€/t p. a. if the
225 non-ETS sectoral targets are continuously
missed
200
175 Social cost of carbon (CO2) according to the
CO2-Price [€/t]
German Federal Environment Agency (UBA)
150
125 125 €/t - Constant CO2-Price if the non-ETS
125 €/t sector targets are continuously achieved
100
75
50
25
0
2020 2025 2030
Agora Energiewende
16 April 2020 20At times of high wind and solar generation low CO2-emissions
of the electricity mix are generally corelated with low electricity
prices – however so far only in wholesale markets
Electricity generation and consumption, emissions of the electricity mix and electricity prices in the wholesale market (December 2018)
120 700 120 700
600 100 600
100
Emissionsfaktor (CO2 g/kWh)
Börsenstrompreis (Euro/MWh)
Emissionsfaktor (CO2 g/kWh)
Nettostromerzeugung und
80
500 500
-verbrauch (GW)
80
60
400 400
60 40
300 300
20
40
200 200
0
20 100 -20 100
0 0 -40 0
Biomasse Wasserkraft
Wind Offshore Wind Onshore Strompreis Großhandel
PV Konventionelle Kraftwerke Emissionsfaktor des Strommix
Nachfrage Emissionsfaktor des Strommix
Agorameter (2019)
16 April 2020 21A dynamic CO2-contribution would give an incentive for
electricity to be consumed in times when the CO2-intensity of
the electricity mix is small
Effect of a dynamisation of the CO2-Contribution
Electricity production and emissions (Eg. August 2018) according to the CO2-intensity of the electricity mix‘ (Eg. August 2018)
100 750 20
CO2-Emissionen [g/kWh]
Stromerzeugung [GWh/h]
Strompreis [ct/kWh]
80 600
15
60 450
10
40 300
5
20 150
0 0 0
andere EE Onshore-Wind
Offshore-Wind Photovoltaik Börsenstrompreis + EEG-Umlage + sonstige Umlagen + Stromsteuer (2018)
Konventionelle Emissionen des Strommix Börsenstrompreis + dynamischer CO2-Beitrag (125 €/t)
Agora Energiewende (Agorameter) EEX, Agora Energiewende
16 April 2020 22You can also read
