It was cynicism that prevailed in recent days during the debate on the German climate deal (see summary of the deal below). It is striking that it is not only the usual suspects, such as environmental organizations and activists, who are labeling the agreement too soft. This criticism has also been voiced by scientists and economists.
According to the critics, the Climate Accord is a nice try, but it does not go far enough. It is cow towing to voters and industry. The coal industry is not being blocked at all. The transition to electric vehicles is not getting underway. There are too few incentives for industry and agriculture to reduce their CO2 emissions. And … and … and …
“This is a missed opportunity,” says energy expert Claudia Kemfert of the DIW economic institute in Berlin. According to her, the whole deal needs to be tightened up on all fronts. “If that doesn’t happen, Germany will never achieve its CO2 targets for 2030,” she tells Innovation Origins.
For example, Kemfert would like to see at least as much excise duty paid on diesel as there is on petrol. In one fell swoop, this would yield €8 billion, which could be put to good use as an investment in the railways and charging stations for electric vehicles. “Surely it is plain madness that some fossil fuels are still being subsidized.” Another blunder is the stricter regulations for onshore wind turbines. “As a consequence, the potential from further development of wind energy will be marginalized.”
But climate experts are most disappointed about the introduction of a CO2 tax, which is also very much a controversial issue in the Netherlands as well. The fact that Berlin is introducing this type of tax is considered by almost everyone to be commendable and sensible. “But if petrol becomes 3 cents more expensive in 2021 as a result of this tax, it won’t change the behavior of motorists”, says a cynical Constantin Zerger from the German environmental action group DUH in a reaction to a press release. “That’s even less than the daily fluctuations at the petrol pump.”
According to Kemfert, Berlin is focusing too much on the short term. The governing parties SPD, CDU and CSU are terrified that voters are turning to populist parties such as the AfD and therefore prefer to take measures that will not be as painful. A good example is the compensation that commuters receive for the CO2 tax. “How on earth do you think you can change anything that way,” Kemfert wonders.
Anders Levermann from the Postdam Institute for Climate Impact Research (PIK) shares this view. “This government proposal is a good example of a policy failure,” he said to the German newspaper Der Spiegel. Like many other scientists, he believes that the CO2 tax should be raised substantially. This is the best and most cost-efficient way to make the transition from polluting technologies and fuels to clean ones.
Levermann: “If we want to achieve the Paris climate targets, we need a tax of at least 35 euros per tonne. Preferably more. But the Federal Government is starting with €10!” That is nowhere near enough to reduce Germany’s greenhouse gas emissions by 2030 from 866 million tonnes to the 563 million tonnes that was agreed to in Paris.
Is there nothing positive about the climate accord? Sure there is. The direction that is being taken with the CO2 tax. Climatologists hope that things will go the same way as they did with the introduction of excise duty on petrol. There was a lot of resistance to this at first. Yet this form of taxation has now become widely accepted. The same thing should happen with the CO2 tax, due in part to how some of this revenue was returned to the public,.
The most important points in the German Climate Accord are summarized as follows:
- CO2 tax
The Berlin government wants to introduce fixed CO2 prices for the transport sector and energy consumption in buildings by 2021. This will be done in the form of certificates which will be sold to companies who will pass on the costs to motorists, for example. The CO2 tax will gradually be increased. A start will be made in 2021 with €10 per tonne of CO2. In 2022 this will be €20, until the price reaches €35 in 2025. If you translate that into the price of petrol, in 2021 it will amount to an additional 3 cents and in 2025 it will be 12 cents. An auction system for CO2 certificates with a minimum price of €35 and a maximum of €60 is planned from 2026 onward.
- More stringent CO2 emission checks Each year, an annual assessment will be made of the extent to which CO2 emissions have been reduced in various sectors of the economy, such as agriculture and transport. If these are not enough, the relevant ministry must come up with additional measures within three months.
As of 2021, motor vehicle taxes for cars with high CO2 emissions will increase. There will also be a higher sales premium for electric vehicles with a purchase price of less than 40,000 euros. The motor vehicle tax for this price range will be lowered to 0.25 percent. As of 2023, the road tax for trucks will be more in line with CO2 emissions and will be double the current rate. Commuters will be reimbursed for the higher costs.
Rail transport must become cheaper and more efficient. For this purpose, an additional €10 billion will be invested between now and 2030, and value added tax on long-distance train tickets will be reduced from 19% to 7%.
Plane tickets will have to be at least twice as expensive as the tax that is on them. Now that means that even the cheapest ticket may not be cheaper than 30 euros. Furthermore, the airport tax is to be increased in order to finance extra investment in the railways.
- Cheaper electricity
In order to avoid overcharging consumers, the environmental tax on electricity – the so-called EEG tariff which subsidizes green electricity – will be reduced by 0.25 cents per kilowatt hour of electricity by 2021. In 2022, this will drop by a further 0.25 cents and another 0.125 cents in 2023. The EEC tariff is currently 6.4 cents, which is about one fifth of the total electricity price in Germany.
- Wind and solar energy
With regard to the electricity supply, a target of 60% green energy has been set for 2030. This will require more wind and solar energy. How Berlin wants to achieve this still needs to be worked out in more detail.
With regard to wind energy, Berlin has proposed stricter guidelines for onshore wind turbines. New windmills must be at least 1000 meters away from residential areas, which means that there is considerably less space available for new windmills. This must be compensated for by more offshore wind power stations. The aim is to increase capacity from 5 to 20 gigawatts by 2030.
Additionally, the subsidy limit for solar energy, which was set at 52 gigawatts, will be lifted.
- Building renovations
An extra subsidy will be granted for making buildings energy-efficient.
- Oil heating
Germany still has many old-fashioned oil heaters, especially in rural areas. This has to stop and in order to achieve this there will be a trade-in incentive of up to 40%. New oil heaters will be prohibited as of 2026.
Berlin estimates that the climate deal will result in approximately €54 billion in additional costs for the state coffers between now and 2023. That is about 1.3% of the gross domestic product (GDP).