Basically, the idea sounds compelling: In order to slow down the earth’s increasing warming, gasoline, diesel, natural gas, heating oil, coal and other climate-damaging fuels in Germany have been subject to a kind of CO₂ tax since 2021, which continues to rise year after year. It is becoming increasingly expensive to pollute the air, which increases the incentive to insulate houses, buy electric cars and generally switch to climate-friendly forms of energy.
Since no citizen should be overwhelmed by the increasing tax burden, the federal government also wants to pay the revenue from the CO₂ tax back to citizens via a per capita flat rate. Because of the uniform amount, such “climate money” would even have a social component: those who produce a lot of carbon dioxide, especially wealthy people, pay more, while low-income households that emit little would generally receive more money back than they pay additionally must.
That’s the theory, which is also anchored in the coalition agreement between the SPD, the Greens and the FDP. The only question is: is it true?
The Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation has now done the math and comes to an ambiguous conclusion. Assuming that all income from the CO₂ tax is distributed in full, according to the analysis, 20.7 million or 49 percent of all households in Germany would benefit from it: for them, the payout is higher than the additional burden. This applies especially to people with low incomes, low to medium energy consumption and more to tenants than to owners of owner-occupied properties, says the study, which is to be published this Wednesday South German newspaper was available in advance.
For another 18.6 million households (44 percent), however, the climate money in this model would be too low to compensate for their individual additional burden. These include almost 4.7 million households that would be hit particularly hard: even taking into account the state per capita payment, they would still have to spend more than two percent of their net income to pay the rising CO₂ price. According to the information, these are often citizens with middle incomes who live in their own older property in the countryside.
For IMK boss Sebastian Dullien, the matter is therefore clear: “The results show that per capita climate money alone is not enough to avoid social upheaval caused by rising CO₂ prices,” said the scientific director of the trade union-affiliated economic research institute. “In order to achieve decarbonization in a socially acceptable way, you clearly need additional support measures in addition to these instruments, for example for the accelerated renovation of buildings and the expansion of local public transport, especially in rural areas.” Against this background, it is “very problematic that many funding programs from the Climate and Transformation Fund could now fall victim to the Federal Constitutional Court’s ruling.” The Karlsruhe judges recently decided that the traffic light coalition’s reallocation of 60 billion euros in Corona aid to climate protection subsidies was unconstitutional.
There will be no more climate money in this election period
It should therefore be clear that the introduction of climate money will no longer be successful in this election period. Finance Minister Christian Lindner (FDP) had actually instructed his employees internally to create all the conditions so that the lump sum payment can begin in 2025.
The price for the emission of one ton of CO₂ is currently set by the state. It was 25 euros in 2021 and is expected to gradually increase to 55 to 65 euros by 2026. After that, things get difficult: Instead of politically set prices, from 2027 a market mechanism will take effect that is based on trading in so-called CO₂ emission certificates. Quite a few experts expect that emitting one ton of carbon dioxide could cost 250 or even 300 euros by the end of the decade. In its analysis, the IMK assumes 275 euros. Without compensation, the study shows, the additional burden would be financially prohibitive for many citizens.
Nevertheless, IMK expert Lukas Endres considers the planned climate money concept to be questionable – especially because the per capita flat rate is “not very targeted.” On the one hand, households from high income groups were also among the beneficiaries. On the other hand, the group of those who have suffered significant income losses is “simply very large”.