The EEG as the core instrument in German climate policy

Some German political parties and economists suggest ending the Renewable Energy Sources Act (EEG) surcharge in the power bill and instead financing renewables through the carbon tax. While the recent carbon pricing debate has focused on equity and political feasibility, it has neglected the elephant in the room: how would this change affect Germany’s ability to meet the 2030 climate goals? Here, we show that this refinancing would put climate goals at risk. Purely market-based renewables are not yet viable, the change could therefore slow down their already sluggish deployment. We thus argue that the EEG remains the quintessential instrument for German climate policy in the coming decade.