16 Jun 2021, 12:24
Julian Wettengel

Per capita refund of transport CO2 price fairest form of climate action – researchers

Clean Energy Wire

A CO2 price as a surcharge on the fuel price, with the entire revenue flowing into a uniform per capita refund, is by far the fairest form of climate action in the transport sector, said researchers of the Mercator Research Institute on Global Commons and Climate Change (MCC). Only the highest-income fifth of the population in Germany would face additional expenses: with a CO2 price of 55 euros per tonne, as planned for 2025, this equals 0.1 percent of the average income of all households in this group. In contrast, the poorest fifth of households will be relieved by 0.8 percent, said the researchers. Regulatory measures, such as standards, subsidies and driving bans, can -- contrary to what is often assumed -- have very problematic distributional effects without the option to alleviate these by returning revenues, they write.

The MCC report was published in a paper on the distributional effects of Germany’s energy and climate policy by the Institute for Economic Research (ifo). Researchers from the Potsdam Institute for Climate Impact Research (PIK) and the Leibniz Institute for Economic Research (RWI) write that a per capita refund would increase public support for climate action. Andreas Löschel, head of the energy transition monitoring commission, says that a CO2 price should be the key instrument of climate policy, but a reform of German energy taxes and levies has to be well communicated to the public to avoid backlash. However, the current debate about rising petrol prices “ignores most of the recommendations” on how to do this, which threatens to discredit market economy-driven climate action for a long time, Löschel writes. Researchers from several Fraunhofer institutes write in another article that abolishing the renewables levy and instead financing wind and solar power support through the CO2 price could push necessary sector coupling and thus speed up decarbonisation.

Debates about Germany’s carbon price on heating and transport fuels have put the question of who can and should pay for climate action at the centre of election campaigning. Research institutions and NGOs have made proposals on how to ensure a just reform of environmental taxes and levies.

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