Germany agrees CO2 pricing deal after gruelling debate

Lawmakers in Germany reached a hard-fought compromise on carbon pricing early on Monday, breaking a parliamentary deadlock on the government's much-disputed climate policy reforms.

In a gruelling six-hour meeting that ended in the small hours, they agreed that businesses will pay 25 euros (USD 28) per tonne of carbon they use from January 2021 -- more than double the initially proposed rate.

The new rate -- which was opposed by business lobbies -- is set to increase to 55 euros per tonne by 2025, before eventually being incorporated into an EU-wide carbon trading system.

The breakthrough renewed hope that Angela Merkel's government can pass its four-part climate reform package before Christmas.

The package, which also includes plans to reduce rail prices and raise taxes on air travel, was broadly approved by both chambers of the German parliament last month.

Yet a dispute over costing of the new policies meant that regional representatives in the upper house blocked certain elements of the bill, forcing the government and federal states to return to the negotiating table.

Merkel's government has faced criticism since it presented the new climate package in September, with environmental NGOs and opposition parties claiming it lacks ambition.

Annalena Baerbock, co-leader of the opposition Green Party, said "much, much more" was necessary after Monday's breakthrough.