Germany has set national greenhouse emissions targets of a 65 percent reduction below 1990 levels by 2030 and net zero emissions by 2045, along with various sectoral emissions goals. To achieve these targets, the government has introduced multi-pronged policy measures, including a national emissions trading system (ETS), which complements the ETS at the EU level.
This paper by the International Monetary Fund shows the substantial variation in the price responsiveness of emissions across sectors and thus prices implied by sectoral targets. It proposes various measures to help Germany meet emissions targets with greater certainty and cost effectiveness. The paper also studies the distributional impact of higher carbon pricing and suggests that reducing social security contributions can mitigate the regressive direct impact of higher carbon pricing on lower income households.
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