September 19, 2019 / 1:18 PM / a month ago

FACTBOX-Merkel's coalition finalises German landmark climate plan

BERLIN, Sept 19 (Reuters) - German Chancellor Angela Merkel’s coalition parties start marathon talks on Thursday to agree a landmark climate action plan designed to help Europe’s biggest economy meet its CO2 emission reduction targets by 2030.

The package is also a major test for the alliance between Merkel’s conservatives and the Social Democrats (SPD) who have made clear that it could make or break their government. Both sides need to show their backers the deal is a success.

Sources have said the package, which is in part aimed at stimulating innovation to reduce emissions, will cost at least 40 billion euros ($44.27 billion) by 2023.

Following are the main points under discussion.

CO2 PRICING

The SPD looks unlikely to get the CO2 tax it wants.

More likely to be agreed is the conservatives’ preference for an emissions trading scheme to cover transport and heating, sectors not covered by the EU’s Emissions Trading System (ETS). Suppliers would pay for certificates but the cost would ultimately be passed on to consumers so the effect would be similar to that of a tax.

Initially, a minimum and maximum price could be introduced to avoid extreme price rises and a key question is how the government would ensure a steady CO2 price increase to 2030.

REDUCING BURDEN ON CITIZENS

The SPD insists there must be some financial benefit for citizens to change their behaviour.

One option is to reduce the price of electricity by financing a levy for renewable energy, currently added to consumers’ bills, with revenues from the CO2 certificates. Currently, an average household pays about 200 euros a year on the levy.

RENEWABLE ENERGY

The expansion of renewable energy is likely to be accelerated while the government is expected to stick to its target of sourcing about 65% of power consumption from green sources by 2030.

The parties are likely to lift a cap on support for solar energy and to agree to expand offshore wind energy to 20 gigawatts of capacity by 2030 from 15 gigawatts now.

CAR TAXES

Plans to boost incentives for electric cars and environmentally friendly trucks are expected to be agreed. A draft document shows incentives for electric cars costing less than 30,000 euros will increase to 6,000 euros from 2021 from 4,000 euros

On the other hand, higher taxes for petrol-guzzling SUVs could be brought in.

BUILDINGS

Tax incentives to renovate buildings to improve energy efficiency are almost certain, including support for partial insulation work such as installing a new roof.

To encourage a move away from oil heating, an important factor in building emissions, the parties are discussing a range of plans from introducing incentives to an outright ban.

TRAINS

In what critics say is a mostly symbolic gesture, sales tax on long-distance train tickets is likely to be cut to 7% from 19% with the aim of attracting 5 million more passengers per year. Tracks will be maintained and renovated more quickly than previously and freight transport made cheaper.

AIR TRANSPORT

Cheap flights are due to become more expensive. Domestic flights will not be possible for less than 30 euros. ($1 = 0.9036 euros) (Reporting by Markus Wacket; Writing by Madeline Chambers; Editing by Catherine Evans)

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