The federal ministries are coming up with additional costs of 70 billion euros for the year 2024. As a solution, Economics Minister Robert Habeck proposes eliminating climate-damaging subsidies. That, says Jens Boysen-Hogrefe, will not be enough to plug the huge hole in the household. “I just don’t see the hope of generating huge additional income (…),” says the economist at the Kiel Institute for the World Economy in an interview with ntv.de.
ntv.de: What are climate-damaging subsidies?
Jens Boysen-Hogrefe: That’s not so easy to define. There are many areas of tax law that can lead to climate-damaging behavior. An example is the distance fee.
However, all commuters receive the distance allowance, regardless of whether they travel by car or bicycle.
Yes, but 80 percent of commuters use the car. Accordingly, there is already a connection between distance allowance and car use. Of course, the aim of this measure is not to increase CO2 emissions. But it is likely to have the undesirable side effect of promoting more commuting distances and thus more CO2 emissions.
A second example that is often cited is the company car privilege. Is it really a climate-damaging subsidy if someone needs a car to do their job?
The cars are used not only for official but also for private purposes. The company car regulation is currently designed in such a way that additional consumption is not significant for the user. New vehicles in particular are relatively heavily subsidised. This is also reflected in the statistics: the company cars are all relatively large and quite young and consume more than private cars.
But doesn’t the company car privilege only apply to e-cars?
It also applies to hybrid vehicles. Anecdotally, we hear that after two years the cars are returned to the lessor’s yard and the charging cable hasn’t even been unpacked. The company car regulation, as it is now, simply invites inefficient behavior.
The commuter allowance and the company car privilege are two examples. Do you have any more?
So it’s definitely worth noting that aviation fuel is still tax-advantaged.
Why are there these subsidies?
In the case of aviation fuel tax breaks, this is relatively easy. Attempts have been made to promote air travel in Europe for a long time. You would certainly do that differently today. But if this subsidy were to be abolished today, that would be a locational disadvantage for German airports. With regard to climate change, I still consider the tax concession to be a questionable measure.
How much money are we talking about here?
When we talk about the tax exemption for aviation fuel, the only bigger sums involved are when long-haul flights are added. But there would be strong evasive reactions, so that at most earnings in the lower single-digit billion range can be expected. Neither the abolition of the distance allowance nor the modification of the company car regulation would bring in large sums. The regulations will probably not be dropped without replacement, because low-income earners in particular often have longer commutes. The bottom line here is that we are talking about single-digit billions. That will not raise the federal budget to new heights.
Two years ago, the Federal Environment Agency added up all climate-damaging subsidies and came up with a total of 65 billion euros. That would solve the problem in the budget dispute, wouldn’t it?
Firstly, the calculation does not take into account the fact that replacement regulations have to be made for many measures. I think it makes a lot of sense to change the company car regulations and replace the travel allowance. Politically, however, this will not be enforceable without alternative measures. And these will also cost money. Statistically, it may add up to 65 billion euros, but they wouldn’t bring that much money into the budget if they were actually abolished.
And secondly …
… there are measures in the list of the Federal Environment Agency that I would not classify as climate-damaging subsidies or that could even have a climate-political benefit.
For example?
The list also mentions the low VAT on animal products as a subsidy. This is not a subsidy. You can demand an increase in VAT on animal products, and I think that makes sense. But that’s just a tax increase, no subsidy will be canceled.
An increase in VAT on animal products would bring more money into the household, wouldn’t it?
Yes, absolutely. But does this remove a subsidy? The question here is what the alternative to meat consumption would be. This is consumption of other foods. These are usually also subject to 7 percent VAT. It makes sense as a climate measure because it means fewer animal products are consumed, some of which are harmful to the climate. But that would not be the end of a subsidy, but a tax disadvantage for meat consumption.
Is Habeck’s desire to plug the hole in the federal budget by eliminating climate-damaging subsidies not realistic?
I think the elimination of climate-damaging subsidies for combating climate change makes perfect sense. However, I do not see the hope of generating huge additional income in order to push a large number of new projects.
Clara Suchy spoke to Jens Boysen-Hogrefe
