Quantifying the net cost of a carbon price floor in Germany

The German energy and climate policy mix is failing to decarbonize electricity production until now, with only 6% overall CO2 emissions reductions since 2005. Using empirical methods and hourly market data, we estimate the aggregate supply curve of the German power market and simulate the effect of a 20(sic)/tCO(2) and 40(sic)/tCO(2) carbon price floor on the German power market and on the renewable subsidy scheme. With the 40(sic)/tCO(2) carbon price floor, median prices increase by 37(sic)/MWh and average price peaks by 50(sic)/MWh. At the wholesale level, the market's annual volume increases by some (sic)18 billion to (sic)39 billion. At the retail level, however, the net cost to consumers is moderated due to costs savings from the renewable subsidy scheme worth some (sic)4 billion, or roughly one-fifth. The same ratio applies to a price floor at 20(sic)/tCO(2).