Transport receives highest share of Germany's climate-damaging subsidies by far – report
Out of a total 35.8 billion euros of government funds going into measures that have a negative effect on the climate, the transport sector received just under 25 billion in 2020, showed a report by six research institutes including the Öko-Institut and consultancy Prognos.
The report, which was commissioned by the economy ministry (BMWK), for the first time quantified the effect of government subsidies on greenhouse gases in the country, both positive and negative. It took the reference year 2020, and projected the effects on emissions for the years 2023 to 2030.
Tax rebates for diesel fuel, the commuters' allowance and company car privileges, for example, could increase emissions by around 50 million tonnes of CO2 equivalents (tCO2e) by 2030, according to the report.
More money in climate-damaging subsidies
The research institutes calculate that most of the subsidies they assessed have a climate-positive effect, meaning the measures they support could help reduce emissions in future. Among the ones with the biggest emission-reducing effect are subsidies for industry energy efficiency (40 million t CO2 eq saved by 2030) and building energy efficiency (-53 million tCO2e by 2030).
However, in total, there is more financial aid and tax breaks for climate-damaging than climate-friendly subsidies. Seventeen subsidies amounting to almost 7.4 billion euros in funding or reduced tax revenue have an emissions-increasing effect, compared to 72 measures worth just under 6.7 billion euros.
The effect of all climate-damaging subsidies added together could result in 156 million tonnes of greenhouse gas emissions by 2030, according to the report.
In their coalition agreement, government parties said they would reduce subsidies harmful the climate and environment. Chancellor Olaf Scholz reiterated this goal to help his government consolidate reformed budgeting plans in the wake of a landmark court ruling which threw public funding plans for climate measures into disarray.
However, so far the government has failed to reduce subsidies as promised, partly because of how the government defines them. For example, it does not recognise some assistance programmes, including on company cars and diesel fuel, as subsidies.
"A basis for discussion"
As an inventory of government incentives that have either positive or negative effects on the climate, the report now provides "a basis for discussion", an economy ministry press spokesperson said. The report's aim was "not to derive reform options directly from this, but rather to analyse the status quo," she added.
However, a spokesperson for the finance ministry added that there are "no plans to make any changes in the coming financial year on the basis of this report," noting that elements such as the commuter allowance were not categorised as subsidies.
The report authors broadened the official definition of subsidies to include 'state favours' and other public funding for over 120 measures.
It "creates a basis for an objective debate on the elimination, reduction or reform of climate-damaging subsidies and other state favours," Öko-Institut researcher Julia Repenning wrote in a press release. The aim was to create transparency around the greenhouse gas impact of subsidies, according to Prognos.
Environmental groups call for subsidy reform
Environmental NGO Green Budget Germany (FÖS), which focuses on eco-fiscal policy, called for a subsidy reform. "All potential savings for the budget must be carefully examined, especially if they contain counterproductive incentives for climate-damaging products and behaviour," FÖS head Carolin Schenuit said.
The transport and environmental association Verkehrsclub Deutschland (VCD) echoed calls to abolish the climate-damaging subsidies. "The state is not only foregoing a lot of money, it is also subsidising the emission of large quantities of CO2," VCD head Michael Müller-Görnert said. "The budget situation is tense and the climate crisis is worsening. It is absurd to spend such sums on environmentally harmful measures," he added.
Both environmental NGOs Friends of the Earth Germany (BUND) and Environmental Action Germany (DUH) also called for the most climate-damaging subsidies to be abolished. "We need to move away from the unspeakable practice of providing billions of euros in taxpayers‘ money every year for the private use of company cars, discounted diesel or cheaper flights," BUND head Tina Löffelsend said.
