Germany's two houses of parliament are poised to more than double the starting price for carbon dioxide emissions from the transport and heating industries when the charge is introduced in 2021.
German news agency dpa reported Monday that a deal was reached after overnight talks to get a package of measures for tackling climate change through parliament.
While Germany is part of an EU-wide carbon market for CO2 emissions from the energy sector and heavy industry, transport and heating are currently exempt from that trading system.
Chancellor Angela Merkel's government had initially set the price for CO2 emissions from transport and heating fuels at 10 euros ($11.13) per ton, but the environmentalist Green party, which holds key votes in the upper house of parliament, demanded it be set higher.
Dpa reported that the charge will begin at 25 euros of CO2, a price that economists say would be more effective in getting people to shift from fossil fuels to renewable energy sources.
The revenue generated will be used to lower electricity prices, which are relatively high in Germany compared to the rest of Europe.
In return for the higher carbon price, long-distance commuters will get higher tax relief starting in 2024.
The agreement, which also foresees lowering value-added tax on rail tickets next year, still needs to be agreed approved by both houses of parliament this week.
The upper house represents Germany's 16 state governments. Although the Greens are in opposition nationally, they are represented in several regional administrations.
German government spokesman Steffen Seibert declined to comment on the agreement until it is published.