German environmental taxes hit record low and don't do enough for climate – report
Clean Energy Wire
The share of environmental taxes in Germany's public revenues fell to a historic low last year and only covers a fraction of environmental costs, said a report by think tank Green Budget Germany (FÖS). "Contrary to the myth that environmental and climate protection makes 'everything more expensive', the share of environmental taxes in public revenues has been declining for almost two decades. In 2021, it was at a historic low of 3.7 percent," the researchers said, adding that they used a narrow definition that included energy taxes on motor and heating fuels, electricity tax, motor vehicle tax and air traffic tax. All other EU countries have a higher share of environmental taxes except Luxembourg.
"Revenues from environmental taxes cover only a fraction of the societal costs of environmental and health damage," the report stated. "The tax and levy system provides too little incentive to reduce environmental pollution and resource consumption. It would make economic and ecological sense for these costs to be borne by those who cause them." Polluters currently pay less than 20 percent of the real costs of damage to the environment and health through environmental taxes, while the general public, other countries and future generations shoulder more than 80 percent, FÖS said.
The researchers called on the government to reform environmental taxes to relieve poorer households and to make them a more effective tool in the fight against climate change. "The most important building blocks are: the strengthening of CO2 pricing, the reform of the energy tax system, the extension of road tolls to passenger cars and the introduction of further economic instruments, for example in the areas of resource and land use." The researchers also warned that "energy tax revenues will decline sharply due to electrification and decarbonisation in transport. An improved and targeted mix of instruments is therefore also of great importance in terms of budget stability."