Chancellor Angela Merkel's Conservatives and her Social Democrat partners agreed a carbon price for energy used in buildings and transport in line with the existing European Union emissions trading scheme.

Chancellor Angela Merkel's government reached a deal on a broad climate plan for Germany after marathon overnight talks stretching more than 18 hours.
Chancellor Angela Merkel's government reached a deal on a broad climate plan for Germany after marathon overnight talks stretching more than 18 hours. (Reuters)

Germany's governing parties on Friday agreed on a new climate protection package, including a domestic carbon price and the possibility of more stringent measures in future, a source close to the talks said.

The source said Chancellor Angela Merkel's Conservatives and her Social Democrat partners agreed on a carbon price for energy used in buildings and transport in line with the existing European Union emissions trading scheme, in which certificates traded at 26.30/tonne on Friday.

Detailed to be announced

That price, lower than the 40 euro price many climate economists had been advocating, means pressure on German companies to cut emissions will be lower than many expected.

But the source added that the scheme, details of which are set to be announced by Merkel later on Friday, will contain provisions allowing the government to take corrective measures if targets on emissions cuts risk being missed.

Another source said the package would have a volume of $55.2 billion (50 billion euros) through to 2023 and would be financed without new debt.

The deal, billed as one setting the direction of Europe's largest economy over the coming decades, was being finalised as protesters massed at thousands of locations around the world to demand swifter action to curb climate change.

Protests in Berlin

Several thousand protesters, inspired by Swedish teenager Greta Thunberg's Fridays for Future movement, rallied at Berlin's Brandenburg Gate as the negotiations were underway.

The outcome appears to be a compromise between the conservatives' desire for an emissions trading scheme that supports innovation in Germany's corporations and the SPD's desire for a carbon tax which would support those hardest hit by the costs of the transition away from carbon.

The plan also includes measures to help households pay for the transition away from the use of polluting heating oil that remains common in much of western Germany.

"There are difficult decisions to be taken," Lars Klingbeil, secretary general of the Social Democrats (SPD) told public radio earlier when asked why talks were so lengthy.

"The challenges are huge ⁠— exiting coal power, building out renewable energy, cutting carbon dioxide emissions."

A poll for public TV has shown 63 percent of Germans thought protecting the climate was more important than economic growth.

Source: Reuters