How to Deal with the Risks of Phasing Out Coal in Germany Through National Carbon Pricing

45 Pages Posted: 21 Feb 2019

See all articles by Sebastian Osorio

Sebastian Osorio

PIK

Robert Pietzcker

Potsdam-Institut für Klimafolgenforschung (PIK)

Michael Pahle

Potsdam Institute for Climate Impact Research (PIK)

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK); Mercator Research Institute on Global Commons and Climate Change (MCC); Technische Universität Berlin (TU Berlin)

Date Written: 2018

Abstract

Germany aims to phase out coal to achieve its 2030 climate target, for which a UK-style carbon price floor is considered. But this measure comes with risks related to the uncertainty about what price level is sufficient, and the waterbed effect arising from unilateral policy under the EU-ETS. Quantifying these risks we find that to be on the “safe side” target-wise, the price must be nearly twice as high as the reference scenario price (33 €/tCO2). Further, cancelling 1.1 GtCO2 of certificates and forming coalitions with other countries is essential to reduce the risk that EU climate policy will renationalize.

Keywords: EU-ETS, carbon price floor, coal phase-out, policy interaction, waterbed effect

JEL Classification: L940, Q580

Suggested Citation

Osorio, Sebastian and Pietzcker, Robert and Pahle, Michael and Edenhofer, Ottmar, How to Deal with the Risks of Phasing Out Coal in Germany Through National Carbon Pricing (2018). CESifo Working Paper No. 7438, Available at SSRN: https://ssrn.com/abstract=3338792

Sebastian Osorio (Contact Author)

PIK ( email )

Potsdam Institute for Climate Impact Research
Telegraphenberg A 31
Potsdam, 14473
Germany
+493312882436 (Phone)

Robert Pietzcker

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Michael Pahle

Potsdam Institute for Climate Impact Research (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK) ( email )

P.O. Box 601203
14412 Potsdam, Brandenburg
Germany

Mercator Research Institute on Global Commons and Climate Change (MCC)

Torgauer Straße 12-15
Berlin, 10829
Germany

Technische Universität Berlin (TU Berlin)

Straße des 17
Juni 135
Berlin, 10623
Germany

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