Germany's e-car subsidies cause 'economic damage' as pandemic strains budget – researchers

Support payments for electric mobility are part of "macroeconomically damaging" subsidies in Germany that have a detrimental effect to economic development as a whole, researchers at the Kiel Institute for the World Economy (IfW) have found. The 850 million euros earmarked for the support of e-car sales and charging infrastructure construction add to the burden on Germany's national budget that is under strain due to the economic recovery measures in the wake of the coronavirus pandemic, the IfW said. "This does not amount to a criticism of electric mobility per se, but rather of the way how these support payments are justified," the researchers said. By picking a particular "future technology," the state presumes to have an insight that it cannot possess, the researchers say, arguing that a "technology-open" support of climate-friendly technologies in transport would be much more suitable in terms of reconciling climate action with fiscal discipline. E-mobility support therefore should be reduced by 20 percent, the researchers conclude. "In the context of the coronavirus crisis, cancelling subsidies no longer is an academic debated but rather an imperative if higher taxes are to be avoided for funding the recovery packages," IfW head Gabriel Felbermayr said.

The funds reserved for supporting the mass roll-out of electric cars pale in comparison to other subsidies Germany disburses to particular sectors of the economy. The transport sector as a whole receives 23.4 billion euros in 2020, with most of these funds going to the semi-public railway service Deutsche Bahn. More than 12 billion euros have been earmarked for agriculture, forestry and fishery and hotels about 1.6 billion euros, the IfW said. Cleaning up the legacy of hard coal mining alone will be subsidised with about 1.9 billion euros, the researchers found.