UPDATE 1-Germany should cut taxes to offset costs of curbing emissions - minister

Germany's economy minister said he would support reducing or scrapping the so-called eco-tax on electricity should the government decide to raise prices on energy in its efforts to discourage carbon emissions that harm the climate.

"Power prices are already too high, we should ensure that there will be no additional burdens," Peter Altmaier told the annual meeting of industry association BDEW in Berlin on Wednesday. He said the eco-tax, which raises 7 billion euros ($7.9 billion) a year for the budget from German power bills, "should be reduced to make power prices more competitive."

German power bills are already among the highest in Europe mostly because they carry a 54% share of taxes and fees to support the expansion of renewable power. This share could rise if the government decided to raise carbon avoidance costs to meet its climate targets for 2030.

Chancellor Angela Merkel said on Tuesday her cabinet would decide by September how to handle areas where carbon-cutting efforts were slower. These include heating and transport, which lag far behind the power sector's high share of green power.

Altmaier said Germany should take into account the social unrest in France after the French government raised energy prices. The minister said people in rural areas should not be disadvantaged by a regime that made transport and heating systems more expensive through enforced modernisations.

City dwellers had better access to public transport, centralised heat provision and insulation schemes that the state would incentivise via higher levies on CO2 emissions, he said. By contrast, people in the countryside needed more cars to get to work and possessed more individual heating systems.

It could be costly for low earners if they were forced to replace heating systems or pay higher penalties on gasoline or diesel usage. "Passing on higher costs to penalise carbon emissions could cause severe public debates," Altmaier said.

The chief executive of utility E.ON, Johannes Teyssen, has proposed a carbon dioxide tax of 35 euros a tonne that would widen the burden-sharing for climate protection to transport and heat provision. ($1 = 0.8889 euros) (Reporting by Vera Eckert Editing by Edmund Blair)