Government Alert: Overabundance of Subsidies Negatively Impacts Climate Change
Regarding the investigation conducted by Oeko-Institut along with five other scientific organizations, recently highlighted by table-media, it's been exposed that the lengthy report, comprising over 150 pages, has been under the control of the German federal ministries of economy and finance since November. However, the document hasn't been made public as yet. As per Oeko-Institut, the investigation was concluded on November 10, 2023, with the technical processing wrapping up on July 31, 2024.
According to the findings of the report, if these climate-harming subsidies continue to persist, they would lead to an additional 156 million tons of CO2 emissions between 2023 and 2030, as compared to no such subsidies. Apart from the transport sector, these subsidies impact agriculture (€4.7 billion), industry (€4.1 billion), energy (€2.1 billion), and buildings and forestry. On the positive side, other state aid during this period is anticipated to reduce CO2 emissions by 250 million tons.
The report indicates that the subsidies contributing the most to higher CO2 emissions are those for energy tax companies (26.8 million tons of CO2 from 2023 to 2030), diesel fuel tax exemption (25.7 million tons), and electricity tax advantages for companies (25.2 million tons). This is followed by subsidies for electricity grid charge (21.5 million tons), reduced VAT rate for meat and other animal products (17 million tons), mileage allowance (16.4 million tons), and flat-rate corporate tax on privately used company cars (7.9 million tons).
Generally, these subsidies also result in significant financial losses for the state, as per the report. In 2020, the diesel tax rebate was the top financially detrimental, amounting to €9.5 billion, followed by company car tax exemption at €6 billion. The mileage allowance accounted for €5.3 billion, and the reduced VAT rate for animal products accounted for €4.3 billion. The experts also estimate a significant financial impact for the tax exemption for aviation fuel on international flights (€2 billion) and the VAT exemption for international flights (€1 billion).
Among the subsidies promoting climate protection, the federal funding for energy-efficient buildings tops the list, with a CO2 savings potential of 53.6 million tons by 2030. This is followed by the promotion of energy efficiency in the economy (40.4 million tons), industry decarbonization investment promotion (18 million tons), and moor rewetting (16.2 million tons). The subsidies for electric car purchases, which have since been abolished, could have prevented 15.4 million tons of CO2 emissions if continued.
More than 100 subsidy regulations were assessed during the study. The report highlights a strong influence of tax measures on greenhouse gas emissions, in both directions. Apart from Oeko-Institut, institutes such as Fraunhofer ISI, IREES, ifeu, Prognos, and GWS were also part of the investigation. The report references the international commitment of the federal government within the G7 states to eliminate all inefficient subsidies for fossil energy carriers by 2025.
The total volume of the comprehensive report, conducted by Oeko-Institut and other scientific organizations, spans over 150 pages. The investigation has identified that these climate-harming subsidies, such as energy tax company subsidies and diesel fuel tax exemptions, contribute to an additional 156 million tons of CO2 emissions between 2023 and 2030.
