Environment Minister Schulze presents reports on the CO2 price

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Berlin"A CO2 price is not a panacea, with which we achieve all climate goals," said Federal Environment Minister Svenja Schulze (SPD) at the presentation of a report on the price of CO2. However, it is an important element in making Germany refrain from burning coal, oil and gas. Especially in traffic and in the heat generation lacked so far enough price incentives for a switch to climate-friendly alternatives.

Going forward, the rule is that anyone who behaves climate-friendly and, for example, does without his car or drives less, is a plus. A so-called climate bonus would be used by the state to repay CO2 pollutants to people, which could benefit small and medium-sized households disproportionately. Proportionally, the revenues could also be used to reduce electricity costs. "It's not about a tax increase," said Schulze.

The Ministry of the Environment commissioned the German Institute for Economic Research (DIW), the Institute for Macroeconomics and Business Cycle Research of the Hans Böckler Foundation (IMK) and the Forum for the Ecological Social Market Economy (FÖS) to assess possible CO2 price developments for the transport and heating sectors investigate. All three reports assume a starting price of € 35 per tonne of CO2 emitted. The price should increase slowly to 180 euros.

For example, the Institutes have studied the effects of pricing natural gas, heating oil, gasoline and diesel, starting at € 35 per tonne of CO2 emitted. The scenario envisages that this price will rise steadily until 2030: over about 80 euros per ton of CO2 in 2023 to 180 euros per ton of CO2 in 2030.

The idea behind it is simple: higher taxes on heating and fuels lead to a reduction in energy consumption and CO2 emissions. The tax revenues behind it are to be returned to households and companies.

Climate bonus to compensate

According to calculations by the DIW, a price of 35 euros for energy consumption in the heating and transport sector results in a tax revenue of 11.1 billion euros per year. Added to this is an additional one billion in VAT.

In order to make up for the burdens, private households should receive a climate bonus of € 80 per person. Of course, in the end, it depends on individual energy consumption to what extent the additional costs are actually compensated. Frequent driver and commuter households tend to be more heavily burdened, as are households in large, poorly insulated homes.

But: "Because low-income households generally consume less energy – for example, they live in smaller homes, drive fewer cars, and if so, then lower-consumption models – on average they get more back on climate bonus than they do at the gas station or pay extra for the heating, "argues DIW tax expert Stefan Bach. In addition, the revenue from the CO2 price from 2023 should be used to lower the price of electricity.

However, the possible reductions in emissions only account for a part of what is to be achieved by 2030 in the individual sectors according to the objectives of the Federal Government. In the transport sector and in the building sector, the new CO2 price could reach a maximum of 40 percent of the necessary reduction compared to 2014, according to the DIW.

"A CO2 price would be an important signal, but by no means enough," concludes Claudia Kemfert, Head of the Energy, Transport, Environment Department at the DIW. "It can only be one element of a larger climate change plan that includes many other measures, such as promoting electromobility or energetic building renovation."

"We have to enter a competition of ideas," demanded Schulze on Friday. She was open to a model. The three opinions were now intended to provide a basis for discussion of the upcoming decisions within the coalition. In the end, however, it would take a comprehensive package of measures to achieve the climate goals.

Premium on social benefits?

Like the DIW, the Hans Böckler Foundation assumes a continuous increase in the price of CO2 from € 35 to € 180, but above all has looked at two different models of payment to the population.
First, households are compensated by a climate premium to the same extent that they are burdened – paid as a single per capita amount to all residents.
Secondly, households receive a permanent climate bonus of € 100 per person per year. Insofar as the additional government revenues exceed the climate premium, they are used in half for raising the climate premium and half for reducing electricity prices.

The experts advise the policy to examine exactly whether the premium on social benefits should be counted. This would have a significant impact on the burden on poorer households, the study said. In principle, a carbon price is seen as a positive factor in promoting lower fuel consumption through higher fossil fuel prices, on the one hand through more economical use, and on the other hand through incentives for investment in CO2-neutral technologies and for innovations.

The Forum Ökologische-Soziale Marktwirtschaft also concludes that a CO2 tax is good for climate protection and can be designed in a socially acceptable way. A disbursement would be possible through different models, essentially via a climate premium, a reduction of the electricity tax or a combination of both measures.

The Association of Taxpayers (BdSt) rejects the proposals. "A national CO2 tax means unforeseeable additional burdens on citizens and businesses in Germany," said BdSt President Reiner Holznagel. Politicians should not forget that consumers are already paying substantial amounts for different environmental taxes: energy taxes for fuel and heating, vehicle tax, aviation tax, electricity tax and various electricity levies totaled around 75 euros in an average employee household Month.

The pressure to act is immense, according to Holznagel. However, he prefers to extend European emissions trading to other sectors. That is also opinion of the FDP. "It would be really expedient to limit the amount of CO2 by expanding certificate trading and to limit the permitted amount steadily," said Energy and Climate FDP budget politician Ulla. An extension would be legally fast and easy to implement. But that's exactly what the SPD considers completely different. At best, it sees an expansion of emissions trading as a long-term project.

The climate cabinet will meet again in mid-July

The Federal Government has been arguing for months about the future course of its climate policy, which must become more ambitious. The coalition had already had to admit that it was no longer possible to reach the German climate targets for 2020. In the considerations of the Union and the SPD, the main thing is not to miss the 2030 climate goals. The government had therefore agreed in March on a climate cabinet.

Under the leadership of Angela Merkel (CDU), Svenja Schulze, Peter Altmaier (Economics, CDU), Julia Klöckner (Agriculture, CDU), Andreas Scheuer (Transport, CSU), Olaf Scholz (Finance, SPD) and Horst Seehofer (Construction , CSU) clarify with which measures they want to achieve the set climate goals. By the end of the year, the coalition wants to pass a climate protection law.

The question of whether and how climate damaging CO2 will be given a price in future will be discussed in more detail in the next meeting in mid-July. Most recently, the Climate Cabinet met on May 29th.

Schulze has been campaigning again and again for a year for a CO2 price and has repeatedly revealed its preference for a tax with social compensation. By contrast, the Union is more in favor of expanding European emissions trading. This is not recommended in the short term, said Claudia Kemfert DIW. On the other hand, a CO2 tax can be introduced quickly.

More: What the German Environmental Council thinks of the climate policy of GroKo.

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