Germany s Ecotax Reform : Implementation, Impact, Future Development

Transcription

1 Germany s Ecotax Reform : Implementation, Impact, Future Development ETR +ET Ecotaxes in the New Member States Berlin, October 12, 2005 Dr. Anselm Görres Chairman Green Budget Germany

2 Germany s Ecotax Reform : Implementation, Impact, Future Development With your permission: First a short commercial Problems and tools debate belong together Facts and figures: Germany s Social-ecological Tax Reform in five steps Some implications from the German debate A European and Global Perspective German Ecotax Reform and Japan Exhibit 2

3 GreenBudgetNews: A Platform for European and Global Debate Full Name: European Newsletter on Environmental Fiscal Reform. First edition appeared in october 2001 Cooperation Partners: ÖGUT - Austrian Society for Environment and Technology; DEC - Danish Ecological Council; CAAG - Clean Air Action Group, Hungary Topics: Green Budget Reform on EU-level, in individual European countries, and worldwide We are looking for Corresponding Partners who: Write articles case by case Report from their countries on a regular basis Send the newsletter to their own mailing list Or submit addresses to us for distribution German Ecotax Reform and Japan Exhibit 3

4 German Ecotax Reform and Japan Exhibit 4

5 And here s how: To become a member: To subcribe to our newsletters: To find useful information about Green Budget Reform: foes@foes.de German Ecotax Reform and Japan Exhibit 5

6 SELECTED WORLDWIDE ECOTAX PRESENTATIONS BY -MEMBERS After some time we realized that is not only an NGO but also a travel agency Talinn Hamburg London Krakau Munich Wien Prag Barcelona Madrid Tokyo Vancouver Portland Ottawa Vermont Cleveland Havanna Sydney Hamilton Santiago German Ecotax Reform and Japan Exhibit 6

7 WORLDWIDE CO2-EMISSIONS IN 1000 TONS The only way to stop and reverse current trends is by changing our behaviour and our structures Fossil ressource crisis?!? Our decision! Radical change Do nothing German Ecotax Reform and Japan Exhibit 7

8 INCREASE OF NATURAL DISASTERS SINCE 1950IES Climate change costs money Number of weather disasters Economic costs in billion Dollar 432,2 Covered by insurance in billion Dollar Increase > factor 10 41, ,5 11, ,4 23, , Reference: Munich Re German Ecotax Reform and Japan Exhibit 8

9 For a courageous choice of eco-instruments, we need to combine three conditions Ecological Awareness High Political Courage High Low Economic Wisdom Low High Low High Quality of Eco- Policy Low German Ecotax Reform and Japan Exhibit 9

10 So we should not behave like the famous three monkeys of the Toshogu Shrine! German Ecotax Reform and Japan Exhibit 10

11 Mankind seems to learn only by catastrophes 1859 Battle of Solferino Book of Henry Dunant World War I World War I 1945 Hiroshima, Nagasaki 1986 Czernobyl 1864 Red Cross founded in Geneva 1920 League of Nations 1945 United Nations founded 1970 (!) Non-proliferation Treaty 1990s nuclear exit of some countries German Ecotax Reform and Japan Exhibit 11

12 Katrina destroyed the dykes of New Orleans..... how many more Katrinas do we need, until the walls of ignorance and indifference are broken? German Ecotax Reform and Japan Exhibit 12

13 FINANCIAL EFFECTS OF ETR IN GERMANY (IN BILLION EURO) Energy taxes in Germany increased by 55 percent % Increase 52,7 6,5 5,0 1,8 16,0 Electricity Natural gas Fuel oil Diesel Budget Use of ETR 9% 3% Pensions system Environment Projects 88% 34,1 Energy taxes 1998 Energy taxes 2003 Decrease in pension costs: Calculative: 1,7 % (ca. 480 Euro relief in average per employee) In fact: only 0,8 % (because of contrary effects) German Ecotax Reform and Japan Exhibit 13 22,8 Fuel

14 FISCAL INSTRUMENTS WITH ENVIRONMENTAL IMPACT IN GERMANY (Bill. Euro) Over 100 Billion of taxes and subsidies directly affect the environment 66 Green Taxes Inclues 4-5 bn. paid by utilities 8 Green Subsidies Estimated world total: $ Bn Harmful Subsidies Impact of Red/Green Coalition Σ Conclusions Taxes have 8 x more weight than green subsidies Harmful subsidies are 4-5 x bigger than green ones Cutting bad subsidies perhaps most important venue Red-Green Coalition had biggest impact through ecotax Comments Many indirectly harmful subsidies here not considered Green taxes include road toll with 2006 volume Green subsidies include Third-partysubsidies (mainly EEG) German Ecotax Reform and Japan Exhibit 14

15 LEVIES AND SUBSIDIES WITH ENVIRONMENTAL IMPACT IN GERMANY (Bill. Euro) In Germany, the pressure on ecologically counterproductive subsidies is mounting TAXES (2003): 65 NEGATIVE SUBSIDIES (2004): 36 Petrol 22,8 Diesel Tax Reduction (TB) 6,4 Diesel 16,0 Home Builders (TB) 5,9 Electricity 6,5 Commuters (TB) 4,0 Non-Energy 5,0 Industry Eco Tax Reduction (TB) 3,3 Natural Gas Toll (2006) Heating Oil 5,0 3,0 1,8 Coal and Lignite (SB) Nuclear Energy (TB) Air Traffic VAT (TB) 3,2 2,0 0,5 POSITIVE SUBSIDIES (2004): 8 Co-Generation (TB) REN Bio-Fuels (TB) REN Market Intro (SU) 1,5 1,0 0,5 Other Direct subsidies 0,4 Building Modernization CO 2 0,2 Air Traffic Kerosene (TB) Increasing pressures: Fiscal deficit rising (Maastricht!) Growing critique of overcomplexity Growing demands for tax reform Fiscal needs of the future 0,4 German Ecotax Reform and Japan Exhibit 15

16 PETROL PRICES IN THE UK AND GERMANY (EURO CENT / LITRE) The base cost rose much more than ecotaxes Values: cents per litre super Value Added Tax Mineral Oil Taxes Cost before tax % +80% D 1999 D 2003 D 2005 UK 2005 German Ecotax Reform and Japan Exhibit 16

17 POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR First Results of Ecological Tax Reform fuel consumption CO 2 -emissions tax rates pension costs empty HGV travel dependence on fossil fuels decreased increased car Sharing energy saving technologies energy efficiency new 3.5 liter cars job creation use of renewable energies German Ecotax Reform and Japan Exhibit 17

18 IMPACT OF ECOTAX ON TRANSPORT EMISSIONS IN D AND UK The two exceptional cases in the EU: CO 2 transport emissions are falling in Germany and the UK 5% Fuel Duty Escalator Ecotax Annual change in CO2 emissionss 4% 3% 2% 1% 0% -1% -2% Other EU UK Germany -3% German Ecotax Reform and Japan Exhibit 18

19 RELATIVE BURDEN SHARES IN TOTAL LEVIES GERMANY Since 1998, tax burden has shifted from labour to nature Increase > 20 percent 11,2 % 7,8 % 8,0 % 8,2 % 9,7 % 16,6 % 13,9 % 58,3 % Nature Neutral Capital Labour 15,9 % 16,4 % 16,7 % 16,4 % 10,9 % 10,3 % 10,9 % 8,3 % 65,4 % 65,3 % 64,2 % 65,6 % 10 to 15 % burden shift needed Nature: Energy taxes, land taxes etc. Neutral: VAT, duties etc. Capital: business taxes, capital taxes etc. Labour: income taxes, social insurance German Ecotax Reform and Japan Exhibit 19

20 German ETR reflects a widespread consensus in Europe 1970/80ies: Wild array of Ecotax proposals Early 1990ies: Convergence of an EU-Consensus SO2 CO2 Waste One-way-bottles Chloride High speed cars Areas Water Batteries Fertilizers Concentration on Energy: not 150 different ecotax items Careful escalation: (slow, but steady growth,3-5% p.a.) Concrete blueprints: detailed macroeconomic models (i.e. DIW/FÖS in Germany) Budget neutrality: No increase in tax quota Burden shifting: From labour to nature Export Protection for energy intensive branches European Dimension of Ecotax Debate and Reform German Ecotax Reform and Japan Exhibit 20

21 German ecotax met similar attitudes as in other countries... Mas vale un diablo conocido que un angel por conocer (Spanish Proverb) Dear God, make me chaste, but not right away (Saint Augustine as a young man) German Ecotax Reform and Japan Exhibit 21

22 In the summer of 2000, there were anti-etr demonstrations throughout Europe But unlike many other EU governments, the red-green coalition didn t back down under pressure German Ecotax Reform and Japan Exhibit 22

23 ADMINISTRATION COST OF DIFFERENT TAXES PERCENT OF REVENUE Ecotaxes have the lowest administration costs Corporate income tax 5,0% Car tax 2,9% Income tax 2,2% Trade tax 1,2% Purchase tax 0,5% Average 1,6 % Ecotaxes 0,13% German Ecotax Reform and Japan Exhibit 23

24 COUNTERARGUMENTS (A) The seven worst arguments against ecotaxes - and how to counter them Ecotaxes will jeopardise competitiveness of nation s industry. For German industry, ETR means net relief of up to 4¼ billion p.a. Ecotaxes will increase the total tax burden. By integration in general tax reform, overall tax quota in Germany was decreased, with net relief for the great majority of taxpayers. Ecotaxes will be self-defeating due to tax base erosion. Through gradual and incremental ecotax increases, stable and even growing tax returns can be expected over many years (as has been the case with gasoline taxes in the past). Ecotaxes hit poor harder than the rich. This used to be true for some sections of the low-income population, in particular for non-taxpayers like students and pensioners, but has been partly offset by energy-cost support. German Ecotax Reform and Japan Exhibit 24

25 COUNTERARGUMENTS (B) The seven worst arguments against ecotaxes and how to counter them (cont.) Ecotaxes can only be enacted on a continental or global scale. Many European nations showed that purely national reforms were possible, though limited in scale and with particular concessions. Ecotax revenues must be devoted to ecological projects. German experience confirms this as a popular demand, but there are strong economic arguments against this demand, mainly the independence of revenue and expense items in the public budget. Ecotaxes do not lead to ecological effects. This position contrary to most economists firm belief in market forces was rebutted by the coincidence of tax increases with increases in crude oil prices. German Ecotax Reform and Japan Exhibit 25

26 POSITIVE AND NEGATIVE EXPERIENCES FROM GERMAN ECOTAXES Despite overall positive effects, German ETR leaves room for improvement... + Actual law much simpler than former models (litre, not joule) + Budget neutrality nearly realised + Part of more general reform with overall tax relief for most tax payers + Therefore mainly winners, very few losers + First positive results for environment and labour market + Only small concessions to gasprice-riots in Reversal in factor burden! Bureaucracy, loopholes and exceptions - more than necessary Coal totally excluded, heating oil and natural gas only in first step Budget neutrality not accepted by public that wants eco-taxes devoted to eco-purposes Winners (mainly industry) do not recognize relief and continue complaining No tapping of huge anti-ecological subsidies German Ecotax Reform and Japan Exhibit 26

27 POLITICAL IMPLICATIONS OF BUNDESTAG ELECTIONS 2005 For a black-red grand coalition, environment is not a top priority... Situation after election Neoliberal, anti-etr coalition (black-yellow) defeated Numerical pro-etr majority (red-red-green) only virtual Grand coalition has Work and growth as top goals No member has strong ecoprofile or wing Planned VAT-increase stopped (for the time being) Possible strategy No all-out continuation of red-green ETR possible, so use chances to cut diesel subsidy - reduce exemptions - optimize interface with ET Concentrate on new venues - tax air traffic (kerosene, VAT) - expand toll (trucks, cars?) - vehicle tax refom Reduce harmful subsidies Build on fiscal needs of State Fight for EU-support German Ecotax Reform and Japan Exhibit 27

28 Sustainability is a central part of The European Dream Five Dimensions of Sustainability Political Liberty Democracy Freedom Constitutional State Economic Welfare Free Market Jobs and Growth Global Trade Social Justice Defense of Nature Global Development and Peace Basic Needs Just Distribution No Discrimination Climate Protection Ressources Amenity, Diversity Global Justice Peace/ Cooperation Global Governance German Ecotax Reform and Japan Exhibit 28

29 With both instruments, there is light at the end of the tunnel solar light! Switching price - upper limit -lower limit Bad news for finance ministers: ecotax rates may still grow, but revenue declines! Switching corridor Sustainable price level Sun Energy Bad energy w/o ecotax Bad energy plus ecotax Alternative energy German Ecotax Reform and Japan Exhibit 29

30 Wanted Internationally: Global Governance and Global Sustainability! World situation defines multiple tasks: Just and sustainable World Order Globally shared responsibility for peace and security Worldwide protection of climate and resources In other words: New rules and new tools German Ecotax Reform and Japan Exhibit 30

31 About Green Budget Germany and the author Green Budget Germany (Förderverein Ökologische Steuerreform e.v./ FÖS) is a nonprofit organisation, founded in We participate in the German and European Ecotax and Emission Trading Reform with own contributions and through communication in and with the business, scientific and political communities. Among other publications, we publish newsletters in German in English: ÖkoSteuerNews and GreenBudgetNews. Dr. Anselm Görres, born in 1952, economist and former McKinsey Consultant, is manager and entrepreneur in Munich Germany ( He is cofounder and President of FÖS/. He has written books and many articles about ecotaxes in Germany. Förderverein Ökologische Steuerreform e.v. Brienner Str. 44 D München Fon , Fax -14 foes@foes.de; German Ecotax Reform and Japan Exhibit 31