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Germany’s Ecotax Reform 1999 - 2003:
Implementation, Impact, Future Development
ETR
ETS
Ecological Tax Reform, 11th April 2006, Tallinn
Dr. Anselm Görres – Chairman Green Budget Germany
About “Green Budget Germany” and the author
 Green Budget Germany (Förderverein Ökologische Steuerreform e.V./ FÖS) is a
nonprofit organisation and NGO, founded in 1994.
 Topics: Ecotax Reform (ETR) and Emission Trading (ETS) or more general:
Environmental Fiscal Reform (EFR) including Subsidy Debate
 Target Groups: Business, academic and political communities.
 Publications: Many books, articles and newsletters in German in English:
ÖkoSteuerNews and GreenBudgetNews.
 Dr. Anselm Görres, born 1952, economist and former McKinsey consultant, is
manager and entrepreneur in Munich Germany (www.zmm.de). He is co-founder and
President of FÖS/GBG and since 1985, has written many books and articles about
ecotaxes in Germany.
Förderverein Ökologische Steuerreform e.V.
Landsberger Str. 191 • D-80687 München
Fon +49-89-520-113-13, Fax -14
[email protected]; www.foes.de; www.eco-tax.info
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 3
Readers of
our two
newsletters:
• 7000 in D
• 3000 abroad
...and how
about you?!?
German edition:
ÖkoSteuerNews
...it’s easy:
www.foes.de
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 4
SELECTED WORLDWIDE ECOTAX PRESENTATIONS BY GBG-MEMBERS
After some time we realized that GBG is not only an NGO
but also a travel agency
Hamburg
London
Talinn
Krakau
Munich
BarcelonaWienPrag
Madrid
Thanks a lot for helping to add
Vancouver
Tallinn to our list of destinations
Portland
Malta
Tokyo
Ma ei räägi eesti keelt!
Ottawa
Vermont
Cleveland
Havanna
Sydney
Hamilton
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 5
CONTENT OF THIS PRESENTATION
We’ve come to our next topic:
 Executive Summary/ Introducing Green Budget
 The challenge ahead – from bathtub to bathtub
 Germany’s point of departure in comparison
 Red-Green Ecotax Reform: facts and figures
 Some lessons from the German ETR debate
 A global perspective – epilogue
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 6
Worldwide energy
crisis – still BAU?!?
WORLDWIDE CO2-EMISSIONS IN MILLION TONS
The only way to stop and reverse current trends is
by changing our behaviour and our structures
Does anyone
believe this
will go on
forever?!?
30
25
20
15
„Business as
usual“ (BAU)
10
It‘s our
decision!
5
0
1750
„Radical
change“
1800
1850
© Dr. Görres – www.foes.de March 2006
1900
1950
GBG
2000
2050
2100
The Polluter Pays Principle – Exhibit 7
DIFFERENT IMPEDIMENTS BLOCKING PROGRESS
Whether iceberg (Greenhouse Effect) or Greenland
(resource exhaustion): We must change course!
???
Icebergs?
Never heard
about!
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 8
OIL PRICE DEVELOPMENT FROM 1860 UNTIL TODAY
Congratulations! We’ve finally come back to the oil
prices of 1870!
Look
familiar?
Every engineer
knows: get out
before the tub
curve ends!
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 9
As much as we look:
There‘s less and less oil in the tub
And if there were – we cannot risk
to burn it all in the next few years!
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 10
TRANSITION FOSSIL TO SOLAR (1)
Our only problem is to step from the old, fossil
bathtub into the nice new bathtub of solar energy...
Solar energy bathtub
Fossil energy bathtub
Sun
Energy
With ETR, ETS, and
solar subsidies we’ll
make the transit
faster and smoother!
© Dr. Görres – www.foes.de March 2006
GBG
plus ζ =
efficiency
The Polluter Pays Principle – Exhibit 12
TRANSITION FOSSIL TO SOLAR (2)
Don’t scare people with higher prices forever – tell
them about the sunlight at the end of the tunnel!
Bad news for finance ministers: ecotax rates may still
grow, but revenue declines!
Switching price
- upper limit
- lower limit
Switching
Sustainable
price level
corridor
Sun
Energy
Bad energy
before ecotax
© Dr. Görres – www.foes.de March 2006
Bad energy
plus ecotax
GBG
Alternative
energy
The Polluter Pays Principle – Exhibit 13
CONTENT OF THIS PRESENTATION
We’ve come to our next topic:
 Executive Summary/ Introducing Green Budget
 The challenge ahead – from bathtub to bathtub
 Germany’s point of departure in comparison
 Red-Green Ecotax Reform: facts and figures
 Some lessons from the German ETR debate
 A global perspective – epilogue with hurricane
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 14
GERMAN ECOTAXES IN COMPARISON TO MALTA (in Bn. Euro)
Putting things in perspective: Ecotaxes still small
9
Estonia 2004
 Population: 1,4 million
 GDP: 9 billion Euro
 Taxes 20,8 % of GDP
 Social Security 11,6 % of GDP
 Ecotaxes: 2 % of GDP
100%
2,9
32%
GDP
0,2
Taxes + Ecotaxes
Social Sec.
2%
Germany 2003
• Population: 82 million
• GDP: 2215 billion Euro
• Taxes 21% of GDP
• Social Security 18% of GDP
• Ecotaxes about 4% of GDP* :
(> 10% of all taxes and contributions)
2215
100%
864
39%
89*
= 4%
* Including road toll of 2005 and non-energy taxes
like land tax, tobacco tax etc.
(Percentage values = Share of GDP)
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 15
CONTENT OF THIS PRESENTATION
We’ve come to our next topic:
 Executive Summary/ Introducing Green Budget
 The challenge ahead – from bathtub to bathtub
 Germany’s point of departure in comparison
 Red-green Ecotax Reform: facts and figures
 Some lessons from the German ETR debate
 A global perspective – epilogue
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 18
FINANCIAL EFFECTS OF ETR IN GERMANY (IN BILLION EURO)
Energy taxes in Germany increased by 55 percent,
additional increase in 2005 through truck toll
~ 56
~ 53
2003
+4,3
2002
+2,5
2001
+3,0
2000
+2,5
1999
+4,3
+ 3,0
3,0
Road Toll
(0 → 9-14 cents/km)
2005
6,5
Electricity
(0 → 2,1 cents/kWh)
5,0
Natural gas (0,2 → 0,6 cents/kWh)
18,7 bn €
=
55% increase
1,8
16,0
ETR
Fuel oil
(4,1 → 6,2 cents/l)
Diesel
(31,7 → 47,2 cents/l)
Road toll
for trucks
~ 34
22,8
Petrol
(50,1 → 65,6 cents/l)
Total green taxes almost 90
Bn (incl. tobacco, land etc.)
Energy taxes
1998
© Dr. Görres – www.foes.de March 2006
Energy taxes
2003/2005
GBG
The Polluter Pays Principle – Exhibit 20
GERMAN ETR: RECYCLING OF THE RETURNS
Almost 90 Percent was recycled to citizens in order
to reduce labour cost
Budget use
(mainly in
last year)
9%
Environment Projects
• Renewable Energies
• CO2-reduction for
buildings
3%
88%
Pension
system
Decrease in pension costs:
 Calculative: 1,7 % (ca. 480 €
relief in average per employee)
 In fact: only 0,8 % (because of
contrary effects)
= 17 Bn relief for employers,
employees and pensioners
© Dr. Görres – www.foes.de March 2006
Govt.
Soc. Sec.
Economy
GBG
Our Comment:
• Great idea,
at least in
principle
• Less than
perfect
execution
The Polluter Pays Principle – Exhibit 21
FISCAL INSTRUMENTS WITH ECO-IMPACT IN GERMANY (Bill. Euro 2003)
Over 120 Billion of taxes and subsidies directly
affect the environment
Comments
89
Includes 45 bn. paid
by utilities
Estimated
world total:
$ Bn. 1950
6
-26
Includes
non-energy
Green Taxes
Green
Subsidies
Harmful
Subsidies
Impact of Red/Green Coalition
24
6
4
© Dr. Görres – www.foes.de March 2006
S
34
GBG
• Negative value = environmentally, not
fiscally!
• Many indirectly harmful subsidies here not
considered
• Green taxes include road toll with 2005
volume
• Green subsidies include Third-partysubsidies (mainly EEG)
Conclusions
• Taxes have 15 x more weight
than green subsidies
• Red-Green Coalition had biggest
impact through ecotax
• Harmful subsidies are 4-5 x
bigger than green ones
• Cutting bad subsidies perhaps
most important venue
The Polluter Pays Principle – Exhibit 22
POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR
First Results of Ecological Tax Reform
Fuel consumption (-7%)
CO2-emissions (2-2,5%)
Overall tax burden
Pension costs (5,6 bn)
Costs for industry (1 bn)
Empty truck travel
Imported fossil fuels (14%)
Less
© Dr. Görres – www.foes.de March 2006
More
Car sharing
Energy saving technologies
Energy efficiency
Gas-powered cars (x10)
Bio-fuelled cars (x2)
Job creation (≈ 250.000)
Renewable energies
Tax shift towards nature
GBG
The Polluter Pays Principle – Exhibit 23
GERMAN PETROL PRICES IN COMPARISON (EURO CENT / LITRE SUPER)
The base cost (cost before tax) rose much more
than ecotaxes
111
129
132
18
20
103
15
79
Value
Added Tax
Mineral
Oil Taxes
Cost
before tax
13
65
10
+30%
65
69
29
50
6
8
50
19
D 1999
31
D 2003
© Dr. Görres – www.foes.de March 2006
46
+142
%
D 2005
GBG
44
43
Estonia
UK 2005
36
USA 2005
The Polluter Pays Principle – Exhibit 24
IMPACT OF ECOTAX ON TRANSPORT EMISSIONS IN D AND UK
The two exceptional cases in the EU: CO2 transport
emissions are falling in Germany and the UK
Annual change in CO2 emissionss
5%
Fuel Duty Escalator 1993-1999
Ecotax 1999-2003
4%
3%
2%
Other EU
1%
0%
1996
1997
1998
1999
-1%
2000
2001
2002
UK
Germany
-2%
-3%
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 25
TOTAL CHANGE IN OILIMPORTS FROM 1998-2004 IN MILLION BARRELS PER DAY
While the US increased their oil imports by 21
percent, Germany reduced it by 14 percent
1998
USA
9,764
2004
11,851
Absolute
Change
Change in percent
21
2,088
-14
Deutschland
2,867
2,459
-0,408
Saving energy perhaps less
costly than fighting wars for oil...
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 27
CONTENT OF THIS PRESENTATION
We’ve come to our next topic:
 Executive Summary/ Introducing Green Budget
 The challenge ahead – from bathtub to bathtub
 Germany’s point of departure in comparison
 Red-Green Ecotax Reform: facts and figures
 Some lessons from the German ETR debate
 A global perspective – epilogue
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 28
BRIEF HISTORY OF ETR IN GERMANY
Only 20 years from textbook to lawbook
(Pigou: 1924)
1978 First proposal by Hans Christoph Binswanger, Swiss economist
1980s Politicians, parties, NGOs like BUND, and others discover the concept
(e.g. Prof. Ernst von Weizsäcker). Radical approaches even advocate
total substitution of conventional taxes through ETR (UPI)
1990s Double Dividend Debate. Social Democrats and Greens take ETR into
their programmes, but German unity distracts from the debate
1994 FÖS/GBG presents first FÖS-Memorandum after DIW-study financed
by Greenpeace. Both claim: Double dividend is possible.
Second round of intensive political debate – in theory, all parties are in
pro. But Helmut Kohl wins election and freezes debate. Merkel silent...
1998 Green Party triggers third round of debate with demand for fuel price to
5 DEM/litre. ETR becomes important issue in 1998 campaign
1998 Gerhard Schröder leads Red-Green Coalition to its first victory.
1999 On April 1st, German ETR enters into effect – after two decades.
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 29
German ecotax met with similar attitudes as in other
countries...
 “Mas vale un diablo conocido
que un angel por conocer”
(Spanish Proverb –
better a known devil than an unknown angel
)
 “Dear God, make me chaste,
but not right away”
(Saint Augustine as a young man)
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 30
German ETR debate was part of a widespread
consensus throughout Europe
1970/80ies:
Wild array of Ecotax proposals
Early 1990ies:
EU-wide consensus emerges
ENERGY
or CO2
© Dr. Görres – www.foes.de March 2006
GBG
• Concentration on energy/CO2:
not 150 different ecotax candidates!
• Careful escalation/ no shocks:
Slow, but steady growth,3-5% p.a.
• Concrete blueprints:
(like Green Budget in Germany 1994)
• 100% Budget neutrality:
No rise in tax quota – no gain for State
• Shifting of tax burden:
From labour to nature
• Export protection
for energy intensive branches
• European and global dimension
of ecotax debate and reform
The Polluter Pays Principle – Exhibit 33
In the summer of 2000, there were anti-ETR
demonstrations throughout Europe
Unlike many other EU
governments, the redgreen coalition didn‘t
back down under
pressure…
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 34
One of the most played plays in this debate is from
Molière – works fantastically since 1673!
So beware of
Phantom Pain!
• Very frequent and
popular disease
• Particularly with
business people
• Car drivers also
quite often affected
• Tabloids love to fight
for the poor victims!
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 35
COUNTERARGUMENTS
ETR proofed that most former cons were wrong
Competitiveness
Isolation
•
•
•
•
Net relief of € 1 bn yearly for German industry.
Today, we are still world export leader
Germany was in excellent company (Benelux, Scandinavia)
Never wait for a supra-national ETR if you really want it!
Higher
taxes
• Tax quota 2004 much lower than 1998
• ETR can reduce government spending, i.e. less eco-subsidies
No elasticity!
• Reinforced by oil price increase, demand elasticity became obvious
Self-defeat
• ETR contributes nearly 20 bn. Euro to budget
• Energy more stable than other tax bases – no Laffer effect!
Hits poor harder than rich
• Burden offset by general tax reform
• Pension financing relieves employers, employees and retirees
• Though popular demand, economically questionable
Green Taxes,
green projects • Revenue in Germany much to high for ecological earmarking
• Pigou tax for internalization, fiscal revenue secondary
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 36
ADMINISTRATION COST OF DIFFERENT TAXES – PERCENT OF REVENUE
Bureaucracy? Ecotaxes with lowest admin costs
Corporate income
tax
5,0%
Car tax
2,9%
Income tax
2,2%
Trade tax
Purchase tax
1,2%
0,5%
Average 1,6 %
Ecotaxes
0,13%
© Dr. Görres – www.foes.de March 2006
GBG
Without
exemptions even
lower admin cost!
The tax with lowest
admin costs gets
the most bashing –
are only old taxes
good taxes?!?
The Polluter Pays Principle – Exhibit 37
EXECUTIVE SUMMARY (0)
German ETR fulfilled its promises for economy and
ecology, but was less successful in political terms
Effects
Pos.
Neg.
Economical
+++
–
None of the dire predictions
came true!
++++
–
It did what it promised, with a
little help from oil prices
+
–––
Environmental
Political
IN TOTAL
++++
++++
© Dr. Görres – www.foes.de March 2006
Comment
Remained a net burden despite of good debate start
– – – – WE MUST IMPROVE THE
–
POLITICAL MARKETING!
GBG
The Polluter Pays Principle – Exhibit 38
SOME POLITICAL LESSONS
Looking back to 1998ff – what should be have
changed?
 Take budget neutrality less literal – devote up to
ten percent of ETR-revenue to green projects
 Using these projects, give more effort to sell ETR
 Best to embed ETR in general tax/ social reform
 Show job effects, combined with promotion of
renewable energies
 Use emotion and humour, ETR is not a funeral!
 Show similar policies in other countries
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 39
Future ecotax campaigns should not stress
dangers, but innovation, benefits and future jobs
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 40
JOBS IN THE ENERGY SECTOR IN GERMANY 2005
More jobs in RENs than in our heavily subsidized
problem energies
6000
10000
20000
Water
Geothermal power
Solar
REN: 150.000-170.000 jobs
50.000
Bioenergy
Problem energies: 107.000 jobs
64.000
Windpower
44000
Renewable Energy
© Dr. Görres – www.foes.de March 2006
coal
38000
nuclear power
GBG
25000
lignite
Source: BEE 2005
The Polluter Pays Principle – Exhibit 41
Even our MoE officials in Berlin came up with very
funny promotion ideas
Bad eyes
By turning
off the light
earlier, you
get..
Movie about enery-conscious driving
www.bmu.de/files/allgemein/video/mpeg/bmu_spot_engl.mpg
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 42
POLITICAL IMPLICATIONS OF BUNDESTAG ELECTIONS 2005
For the new grand coalition, climate policy remains
an important priority
Situation after election
• Neo-liberal, anti-ETR coalition (black-yellow) lost
• Pro-ETR majority (red-redgreen) only virtual
• Grand coalition has “work
and growth” as top goals
• No member has very
strong eco-profile/ -wing
• But: Priority for climate
policy already confirmed!
• New MoE social democrat
© Dr. Görres – www.foes.de March 2006
Our recommendations
• Concentrate on new venues
- tax air traffic (jet fuel, tickets, VAT)
- expand toll (trucks → cars?)
- reform vehicle tax
• Reduce harmful subsidies
• No all-out continuation of old ETR,
but use opportunities to
- cut diesel subsidy
- reduce ETR-exemptions
- optimize interface with ET
• Build on fiscal needs of State
• Fight for support and higher rates in EU
GBG
The Polluter Pays Principle – Exhibit 43
Air traffic should be a primary target for new
measures of the new German Government
• VAT
• Ticket tax
• Kerosine
tax
• Integration
with ETS
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 44
CONTENT OF THIS PRESENTATION
We’ve come to our last topic:
 Executive Summary/ Introducing Green Budget
 The challenge ahead – from bathtub to bathtub
 Germany’s point of departure in comparison
 Red-Green Ecotax Reform: facts and figures
 Some lessons from the German ETR debate
 Some remarks about the instrument debate
 A global perspective – epilogue
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 45
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
 Basic Needs
 Just Distribution
 No Discrimination
+++
+
Global Development and Peace
 Global Justice
 Peace/ Cooperation
 Global Governance
++
+
Defense
of Nature
 Climate Protection
 Ressources
 Amenity, Diversity
++/–
+/– –
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 46
CONDITIONS FOR GOOD INSTRUMENT CHOICE
For a high quality combination of eco-instruments,
we need awareness, courage and wisdom
Economic
Wisdom
Political
Courage
Low
Ecological
Awareness
High
Quality
of EcoPolicy
Low
Low
© Dr. Görres – www.foes.de March 2006
GBG
Low
The Polluter Pays Principle – Exhibit 47
?
Südamlik aitäh! EE
D anke vielmals!
THANK YO UK INDLY!
ありがとうございます
© Dr. Görres – www.foes.de March 2006
GBG
The Polluter Pays Principle – Exhibit 48