Post Script: Missed Climate Target 2020: Time for a Reorientation of Climate Policy?

New calculations by the German Federal Ministry for the Environment show that Germany will probably fall far short of its climate targets for 2020. So what incentive systems are needed for an effective climate policy that makes economic sense? Complementing the articles in ifo Schnelldienst 1/2018, Andreas Löschel and Oliver Kaltenegger, University of Münster, write that developments in recent years have revealed clear weaknesses in the current climate policy instrument mix. German policy is not delivering results; and there is a clear need for a swift reorientation of climate policy. An approach to achieving the goals of the energy concept that makes economic sense would be adopting comprehensive and standardised CO2 pricing as a lead instrument and complementary instruments to address additional market imperfections. A lead instrument that incorporates the following design features needs to be introduced: a long-term perspective, tax neutrality, competitiveness and the ability to innovate, international coordination and social justice.