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Abstract

It is unclear how CO2 emissions in the German electricity sector will develop until 2030. On the one hand, the amendment in the Climate Change Act (as of August 2021) aims to tighten the emission reduction targets, fostering the pathway towards a decarbonised energy system. On the other hand, the complex interplay between the main instruments used to mitigate carbon emissions, fuel prices and the latest energy scarcity as a result of Russia’s war in Ukraine generates pressure for increased emissions. Using an energy system model parametrised to reflect the 2021 energy market situation i.e., before Russia’s attack, our study investigates the possibility that Germany will meet its 2030 climate targets. We then provide a qualitative analysis on how results can change in light of recent events. We suggest establishing a carbon price floor that can be dynamically changed in response to the evolution of other market forces and policies. This instrument would institutionalize a more credible path towards decarbonization and offer investors certainty.