Environmentally Harmful Subsidies
Environmentally Harmful Subsidies
The distinction between what is cheap for companies or consumers and what is expensive is not determined by some law of nature. Prices are controlled by decisive government actions and rightly so, since ungoverned markets are prone to failure in several areas. It is therefore completely legitimate for the state to attempt to prevent these market failures using taxes or subsidies. In the process, however, government action is often at least as damaging. Despite scarce government funds, the German state grants 34 - 42 billion Euros each year in environmentally harmful subsidies. This not only leads to unnecessarily high national debt and high tax rates in other areas, but also means that environmentally harmful behaviour is made cheaper and thereby rewarded. Plane tickets and company cars, nuclear energy and industrial agriculture are not macroeconomically inexpensive; rather, they are massively subsidised by the state and the real costs are being paid elsewhere. However, it is difficult to abolish subsidies once they have been awarded because a select few benefit greatly from them, while the general public bears most of the costs.
Diesel subsidies
Diesel currently has a tax advantage of approximately 16 cents per litre compared with petrol. The privileged position of diesel cannot be justified from an environmental standpoint. GBG therefore calls for a gradual adjustment of fuel tax towards social and economic compatibility. One option is compensation by way of motor vehicle tax or a lower tax rate for heavy goods vehicles.
Tax exemption for kerosene
So far there has been no fuel tax for air traffic, despite the fact that airplanes are the means of transport most damaging to the climate. For this reason GBG regards an international kerosene tax as essential.
VAT exemption for passenger transport in international air traffic
Airplanes benefit from the VAT exemption for means of transport. Were these exemptions to be abolished, the use of air traffic could be reduced. This would help to protect the environment and generate additional revenues of 0.5 billion Euro.
Commuter tax allowance
Commuter tax relief provides an incentive for lengthy travel to work and thus compounds environmental pollution. In addition, only those who pay taxes profit from commuter tax relief and so it is not only environmentally harmful, but also socially unjust. Commuter tax relief should be redesigned with the intention of increasing environmental incentives and social justice.
Exemptions from Ecotax
Many industrial sectors have so far been exempt from the ecotax, (manufacturing, agriculture, forestry, and fish farming) as it was feared that environmental tax reform would have adverse economic impacts. After ten years of ecotax, it is clear that these fears were unjustified and that the exemptions should be abolished.
Agricultural subsidies
At present, intensive agriculture in particular is heavily subsidised, despite the fact that it threatens biodiversity. This leads to extensive environmental damage, and these subsidies should be abolished. GBG proposes, for example, levies for fertilizers and pesticides. These could be implemented gradually and the revenues should flow back to the agricultural sector. This way, the tax would be revenue neutral, whilst avoiding loss of income and competitive disadvantage.
Promotion of renewable energy
The German Federal Government already allocates targeted subsidises to research and the expansion of renewable energy. However, additional means should also be provided.
Subsidies for nuclear energy
While coal and gas-fired power plants have to pay for their raw materials and are, at the same time, burdened by emissions trading, nuclear power plant operators are making large profits due to the increase in electricity prices. A tax on nuclear fuel could transfer these additional profits from power plant operators to the state to the tune of 3.5 billion Euro. Additionally, all subsidies for research in the field of nuclear energy need to be abolished.
Tax advantages for company cars
GBG conducted a study on the advantages of taxation on company cars in 2008. The conclusion was that the preferential treatment of vehicles with high CO² emissions, solely on the basis that they are registered as company cars, is an invalid form of subsidisation. The study (in German) is available here.
Further information
In a GBG study commissioned by Greenpeace in 2008 , it was calculated that 34 billion Euros of environmentally harmful subsidies were granted in Germany. The study (in German) is available here.
GBG published a short concept on environmentally harmful susidies in June 2010. This paper (in German) can be downloaded here.
In its own study, the Federal Environment Agency even arrived at a value of 48 billion Euro worth of environmentally harmful subsidies.
