Greenpeace cautions against disregarding funding for climate issues.
The US government plans to balance the increasing cost of carbon emissions with a climate tax, although this idea remains unsued. Greenpeace, however, believes that this absence of a financial aid for the higher carbon prices at the gas station and heating poses a looming threat to society.
As per a study, if no financial compensation is provided for the increasing carbon prices, households will experience considerable extra expenses. Greenpeace, thus, protests for the prompt implementation of a climate tax. "A carbon price without a climate tax is like a social time bomb," says Bastian Neuwirth, Greenpeace's climate specialist. Greenpeace's research by the Forum Ecological-Social Market Economy demonstrates how a climate tax can significantly alleviate the pressure even for residents in the middle class.
As part of their coalition agreement, the SPD, Greens, and FDP had agreed, "To counteract a rise in carbon price and endorse acceptance of the market system, we will devise a social compensation device beyond the dismissal of the Renewable Energy Sources Act EEG surcharge (climate tax)."
Christian Lindner, the Federal Finance Minister, has stated that distributing a per capita allowance from 2025 is technically feasible. Nonetheless, there's no clarity on whether the coalition will implement this.
Analysis of Greenpeace proposition
In their study, the authors compute the overall expense that families face due to carbon prices — not only the direct expenses associated with heating or fueling, but also the indirect expenses when corporations increase carbon prices to goods like food and home appliances. In the absence of financial reimbursement, the middle-income households are projected to bear extra expenses of nearly 700 euros per year in 2025, and more than 1000 euros in 2027.
Greenpeace proposes a climate tax, where all carbon tax incomes are distributed as a per capita allowance. The climate tax would total 317 euros per head in 2025. In addition to this, Greenpeace suggests taxing the climate tax through income. This would enable lower-income families to hold on to the full amount of the climate tax. As income rises, it would decrease per person by half. The wealthiest 10% of households would face complete taxation of the climate tax, meaning they would effectively receive none.
Nine to 18 billion euros would be funneled back into the state treasury due to the taxation of the climate tax. These funds should be utilized to support low-income families in decreasing their carbon emissions. This would support them in reducing their carbon emissions.
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Greenpeace advocates for the Traffic light coalition to implement the proposed climate tax, as a failure to provide financial compensation for increasing carbon prices could lead to significant extra expenses for households, particularly middle-income families. Greenpeace's proposal includes distributing all climate tax income as a per capita allowance, with wealthier households facing complete taxation to ensure lower-income families receive the full amount.
