German env min calls for raising taxes on transport and heating fuels

Increasing existing taxes on petrol, diesel, heating oil and natural gas is the “most practicable” way of introducing a price on CO₂ emissions in transport and heating to help Germany reach climate targets, Germany's environment minister Svenja Schulze told journalists at a press event in Berlin. However, she added that CO₂ pricing is “not the silver bullet” and must be introduced in close coordination with other climate action measures. “If we have a good climate package for the transport sector on the table, we have to regulate less with CO₂ pricing,” said Schulze. The Social Democrat (SPD) based her assessment on the findings of three reports on the effects of CO₂ pricing commissioned by her ministry she unveiled at the event. “This is an uncomplicated way to make possible a speedy start for CO₂ pricing and have quick climate action effects,” said Schulze. The three reports have similar findings and show that with such a CO₂ pricing, low-income households on average would be hit especially hard, so they suggest a “climate premium” of 75 euros-100 euros annually to pay back revenues to households. The reports by the German Institute for Economic Research (DIW), Green Budget Germany (FÖS) and the Institute for Macroeconomics and Economic Research of the Hans Böckler Foundation (IMK) assess the introduction of a CO₂ price step by step, starting with a moderate price. The researchers struggled to put a concrete CO₂ saving tag on the introduction of CO₂ pricing, due to uncertainties such as price volatility of oil on the world market.

Schulze said she had not decided on any concrete model for CO₂ pricing yet. She said the reports’ findings will be used as input for the debate within the government’s “climate cabinet”, which plans to focus on CO₂ pricing in its next meeting in mid-July. Ahead of the meeting, the government will also receive an expert opinion by the German Council of Economic Experts (Wirtschaftsweise). German Chancellor Angela Merkel’s conservative CDU/CSU alliance is struggling to find a common position on CO₂ pricing, especially in the transport and buildings sectors. After shying away from the debate for a long time, the governing parties and Merkel herself have recently announced a willingness to look into CO2 pricing as way to reach Germany’s 2030 climate targets. The concrete concept, however – whether it be a new CO₂ tax or a cap and trade system – is heavily disputed. The CDU/CSU alliance has so far rejected introducing a CO₂ price by raising taxes. Merkel herself floated the idea of “a coalition of the willing” among European Union countries and announced that the government will make crucial decisions on climate action in September.