Climate bonus payments urgently needed as Germany’s CO2 price rises – gov’t advisor

The German government must quickly make good on its promise to introduce the ‘climate bonus’ (Klimageld in German) support payments to citizens as it increases the national price on carbon emissions in the transport and heating sector, government advisor Veronika Grimm has said. “The climate bonus should have been introduced before the increase of the CO2 price,” the economist said in an interview with the Rheinische Post. The latest increase from 30 to 45 euros per tonne of CO2 equivalents was implemented on 1 January 2024. Introducing the support payments before the increase “would have made it clear that an increasing CO2 price is not a tax increase but simply a steering mechanism,” Grimm said. The price for carbon emissions would have to be increased to more than 100 euros per tonne in the near future to achieve the desired effects, she argued. “People will not accept this if no money is disbursed in return,” which is why the support payments should “by all means come before the next elections” in 2025.

While the government already had provided some relief by abolishing the renewables levy as part of the power price, this could not compensate for support payments. “The climate bonus has a positive redistributive effect – both from high to lower incomes and from those with a high carbon footprint to those with a smaller one,” Grimm said. “This is exactly the desired steering effect: social balance on the one hand and acknowledgement of low-emissions behaviour on the other hand.” As people with a lower income tend to also cause lower CO2 emissions, a flat rate support repayment for all citizens would benefit this group proportionally more, she explained. A family of four people would receive more than 650 euros per year from the climate bonus at a CO2 price of 45 euros per tonne and more than 800 euros if the price was to rise to 55 euros per tonne. “Moreover, the climate bonus increases households’ purchasing power and allows them to make investments that will reduce their CO2 footprint in the future.”

Already in December, an alliance of environmental organisations launched a campaign calling on the German government to pass on revenue from its national carbon pricing scheme to citizens. Government party policymakers had cast doubt on whether the plan to introduce the bonus payments could be implemented, given that the constitutional court ruling causing Germany’s recent budget crisis had “severely restricted” the government’s financial scope.