CO2 price climbs - when will the climate money compensation come?

Energy - CO2 price climbs - when will the climate money compensation come?

Heating and fuel will become more expensive at the turn of the year - but there is no relief in sight from the climate money promised by the coalition government. The SPD, Greens and FDP had already agreed on the project two years ago in the coalition agreement: If the CO2 price rises for climate protection reasons, money is to be paid into citizens' accounts to compensate. However, in view of tight budgets, it is suddenly unclear whether the federal government can afford this at all.

Finance Minister Christian Lindner(FDP) is responsible for the technical implementation. His ministry is fully on schedule. State Secretary Katja Hessel told the German Press Agency that it had been agreed that the payment channel would be created during this legislative period. "The mechanism will be available by 2025 as planned."

Long-term construction site for climate money

So far, there is no way for the federal government to transfer money directly to citizens' accounts. To do this, the federal government has to link the tax identification number that everyone receives at birth to an account number. In addition, only a certain number of transfers are possible per day.

At least progress is now being made on the first problem: "It is expected that a corresponding IBAN will be stored for the tax identification number of all citizens who are willing to do so by the end of 2024," says the Ministry of Finance. However, this does not mean that climate money will then be paid out. Politically, the design of the climate money has not yet been decided, says Hessel.

The financial leeway is narrow

In the end, the climate money will also be a question of available funds. Lower Saxony's Minister President Stephan Weil(SPD) told Die Welt: "I don't see how it could be financed under the current conditions." However, it is more necessary than ever. SPD parliamentary group deputy leader Matthias Miersch also believes that the budget ruling by the Federal Constitutional Court has severely restricted the scope for action. He told Redaktionsnetzwerk Deutschland that the revenue from the CO2 price would first have to replace the missing funds for funding programmes and other measures for climate protection and the modernization of the economy.

Hessel suggested a reform of the subsidy policy. "At the moment, all of the income from the CO2 price is earmarked for funding measures in the climate sector or for subsidies such as the promotion of chip factories," she said. If we want to pay out climate money, the funding policy must be fundamentally changed.

SPD General Secretary Kevin Kühnert sees a hidden message in such statements. If one consequence of the Federal Constitutional Court 's budget ruling for the FDP is that there will be no climate money, "then it must say so openly", he recently warned in an interview with the Stuttgarter Zeitung and Stuttgarter Nachrichten newspapers.

Goal: more climate protection

The CO2 price for all fossil fuels such as heating oil, natural gas, petrol and diesel has been in place in Germany since 2021. This makes the consumption of these raw materials more expensive, which is intended to contribute to climate protection. The coalition recently reached an agreement in the struggle over the federal budget that the CO2 price should increase slightly more than previously planned as of January 1.

The climate money was originally intended to cushion the social consequences. Most recently, Economics Minister Robert Habeck (Greens) argued that citizens would already be relieved because the state would pay the EEG levy on the electricity price. Almost all revenue from the CO2 price would thus flow back to the people. In the coalition agreement, however, the coalition government had stated that the climate money should be developed as a "social compensation mechanism beyond the abolition of the EEG levy".

Advance by consumer associations: 139 euros for everyone

According to consumer advocates, Habeck's calculation does not add up. The total revenue from the CO2 price is significantly higher than the relief from the EEG levy, argues the Federation of German Consumer Organizations (vzbv). In mathematical terms, every citizen would therefore be entitled to climate money of 139 euros for the past three years. A family of four would have to receive 556 euros. Given Germany's current population, the federal government would have to spend around 11.76 billion euros. However, budget politicians argue that there is no scope for this in next year's budget.

Politically, the details of the climate money have not yet been defined either. In their 2021 election manifesto, the Greens called for the compensation to be paid only when the CO2 price reaches 60 euros per tonne. This is still a long way off. Last year, the traffic light government decided against an increase due to the energy crisis. In order to plug the billion-euro hole following the Karlsruhe budget ruling, the price is now set to rise from 30 directly to 45 euros per tonne.

Researcher: CO2 price is too low

Economist Matthias Kalkuhl calls the increase at the turn of the year a "step in the right direction to encourage emission savings and investment in low-CO2 technologies". But: "In order for more citizens to say goodbye to fossil heating systems and combustion cars, it would have to be significantly higher than the Federal Chancellor and the ministers have now planned," he told the German Press Agency. Kalkuhl is Professor of Climate Change, Development and Economic Growth at the University of Potsdam and heads a working group at the Mercator Research Institute on Global Commons and Climate Change.

Is the rising CO2 price actually bringing about the hoped-for change in behavior? There are no reliable findings on this for Germany, says Kalkuhl. "However, we know from a large number of empirical studies for the EU, China and North America that the introduction of CO2 prices alone - even if the prices are initially low - has led to significant reductions in emissions. We therefore assume that emissions in Germany have already been reduced as a result."

The higher CO2 price at the turn of the year could already have an impact on refueling and heating. However, experts doubt whether this will significantly change people's behavior. At the filling station, it is a matter of just over four cents per liter, which is below the daily price fluctuations, explained the ADAC. The effects would therefore probably be limited - especially as many people are dependent on their cars for daily journeys and fuel prices are once again below the critical threshold of two euros per liter for many.

Warning of social explosives

Economist Kalkuhl nevertheless warns. "High CO2 prices harbor enormous social and political explosives - if the revenue from pricing is not returned to the population." The time for a concept is pressing, as Germany is unlikely to achieve its climate targets. "Climate money will not solve all acceptance problems," warns Kalkuhl. "But without climate money, without social compensation, a successful climate policy is hardly conceivable."

In the Rheinische Post newspaper, Monika Grimm, an economist, criticized the fact that the climate money was not introduced before the rise in the price of CO2 and urged the German government to make up for this. "The climate money has a very positive redistributive effect - on the one hand from high to low incomes, and on the other from those with a high to those with a low carbon footprint," said the member of the German Council of Economic Experts.