Towards consistent and effective carbon pricing in Germany?

Germany committed itself to challenging greenhouse gas (GHG) emission reduction targets to 2020 and beyond. It has implemented a composite mix of policy measures to achieve its climate change mitigation goals, including a range of market-based instruments. These measures have helped reduce domestic GHG emissions, as well as achieve other policy objectives. However, they have generated multiple (explicit and implicit) carbon prices, which can reduce the overall cost-effectiveness of climate change mitigation policy. This paper examines the carbon prices that have emerged from the implementation of three key market-based instruments in Germany: energy taxes, vehicle taxes and the EU Emissions Trading System. It also reviews the use of feed-in tariffs to promote electricity generation from renewable sources, with a focus on the implied GHG abatement costs and the interactions with other environmental policy instruments. This Working Paper relates to the 2012 OECD Environmental Performance Review of Germany: http://www.oecd.org/environment/environmentalcountryreviews/oecdenvironmentalperformancereviewsge rmany2012.htm