Protesters hit the streets as politicians agree on a mix of emissions trading and higher taxes to tackle climate change.

German Chancellor Angela Merkel will present details of a broad climate plan for Germany on Friday following a special Cabinet meeting.

The direction Europe’s biggest economy takes on climate change is being closely watched around the world. Marathon overnight talks on the plan stretched more than 18 hours.

German news agency dpa also reported that the country’s governing parties, who have been split over how best to cut the country’s greenhouse-gas emissions, achieved a breakthrough following all-night talks in Berlin.

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Voter pressure

German voters have made clear they consider climate change the most pressing issue of the day.

Students have embraced Swedish teenager activist Greta Thunberg’s weekly protests, holding large rallies – often during school-time on Fridays – that have received widespread support in major cities.

On the back of this environmental concern, the German Green Party has seen a surge in support, finishing second in May’s elections for the European Parliament. Its success has spurred Germany‘s governing parties to take a stronger stance against global warming.

A poll released on Friday by ARD television showed 63 percent of voters saying the government should prioritise climate protection over economic growth. Only 24 percent said economic growth should take priority.

How big is the problem?

Germany is the world’s sixth-largest state emitter of greenhouse gases, with a 2.1 percent share.

It wants to cut those emissions by 55 percent by 2030 compared with 1990 levels. This would mean reducing Germany’s annual output of carbon dioxide and other greenhouse gases from 866 million metric tonnes currently to 563 million tonnes by the end of the next decade.

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Failure to do so would cost Germany financially. Under European Union rules, the country could be fined billions of euros if it does not meet the bloc’s emissions reduction targets.

Merkel has also warned that Germany could lose its position as a technological leader if it does not invest in future clean industries.

Charging for carbon

The biggest divide between Germany’s governing parties has been over how to charge for carbon emissions.

Dpa reported that Merkel’s centre-right Union bloc and the centre-left Social Democrats have agreed to put an added price on transportation and heating fuels, starting at three euro-cents ($0.033) per litre (0.26 gallons) of diesel or petrol in 2021, rising to 10 euro-cents ($0.11) in 2026.

The parties agreed to levy the charge with the help of an emissions trading system (ETS). The advantage of such a system over a hike in fuel taxes is that it can be integrated into the European Union’s existing ETS for heavy industry and the power sector.

By setting a cap on the quantity of certificates available, and steadily reducing that level, Germany and the EU could also ensure emissions targets are met.

Industrial legacy

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German manufacturers – including the country’s powerful car-makers – have indicated they want a clear signal from the government on the path ahead.

Dieter Kempf, head of Germany’s industrial lobby group BDI, urged the government to stop delaying decisions on climate and energy policy.

He called for incentives to invest in climate-friendly technology but spoke out against bans on heavily polluting technology or strict targets for individual sectors.

But Martin Kaiser, executive director of Greenpeace Germany, warned the government not to be beholden to industry, which has successfully blocked strict emissions targets in recent years.

“Phasing out the combustion engine by 2025 is technically possible,” said Kaiser.

While this seems unlikely, dpa reported the governing parties have agreed to ban the installation of new oil-burning furnaces from 2026.

Merkel’s reputation

Merkel, who was Germany’s environment minister during the first UN climate conference in 1995, has repeatedly called tackling global warming a “vital question for humanity”. Her four terms of office, however, have not seen the kind of push that were hoped for.

As other countries cut their emissions significantly, and set ever more ambitious targets, Germany’s emissions have stalled amid opposition from the country’s powerful industrial lobby.

In a sign that she’s hoping to secure support for the deal, Merkel plans to attend the UN climate summit in New York next week, where she will deliver a speech on Monday.