Kai Schlegelmilch* Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin/Germany Green Budget Reform in Germany

1
Kai SchlegelmilchFederal Ministry for the
Environment, Nature Conservation and Nuclear
Safety, Berlin/GermanyGreen Budget Reform in
Germany Results and Perspectives 2nd-3rd
September 2004, Budapest, HungaryInternational
Conference Environmentally harmful subsidies and
ways to eliminate them Though views expressed
here represent government positions in general,
they are made on a personal capacity.
2
Overview of Presentation

• National Climate Protections Programme in D
  Targets, Scenarios and Measures in D
• Features, Impacts and Experiences with the
  Ecological Tax Reform (ETR) in D
• Requirements for Design and Promotion of ETR
• Conclusions
• Prospects for Environmental Fiscal Reforms in
  Germany

3
Rationale for an Ecological Tax Reform (I)

• ETR is the central and most economic instrument
  of the National Climate Protection Programme
• Rationale Using THE signal in a market economy
  for an efficient allocation of resources Prices
  (including taxes)
• The Objectives reduce energy consumption and
  unemployment ( black labour markets), thus
  achieving at least a double dividend
• Tax bads like energy consumption, not goods
  like labour thus also contribute to reduced
  health and transport problems and urban sprawl
• Asking the question What is the relevant
  alternative to achieve the same target? turns
  out to be decisive for the consideration of
  instruments

4
Rationale for an Ecological Tax Reform (II)

• ETR provides for steady incentives for further
  improvements/innovations by entrepreneurs and
  individuals instead of detailed prescriptions
  what to do by the government - often with a lack
  of monitoring due to high control requirements
  with insufficient sanction mechanisms?
  potentially missing environmental targets
• In D Increase and broadening of energy taxes and
  reduction of social security contributions and
  increase environmental protection promotion
  programmes
• Steady increase of several energy taxes in 5
  small steps between 1999-2003
• Steady decreases of social security contributions
  (here pensions fund)

5
History of ETR in Germany I

• 1978 idea was born i.a. by Prof. Binswanger/CH
• 1980ies single env. NGOs (BUND/FoE),
  politicians, parties and other stakeholders
  became interested (e.g. Prof. Ernst von
  Weizsäcker)
• 1988 A study by UPI, Heidelberg proofed total
  substitution of conventional taxes through
  ecotaxes 1. Round of debate triggered by
  radical approach)
• 1990 Social Democrats and Greens had parts in
  their programmes (in favour of environment and
  labour), but unification distracted from this
  instrument

6
History of ETR in Germany II

• 1994 Greenpeace commissioned a comprehensive
  ETR-study to DIW, Berlin Double dividend is
  possible, FÖS/GBG a lobby group for ETR was
  founded.
• 1994/5 2. Round of intensive debates took place
  amongst all stakeholders and publically in which
  basically all parties where in favour of it
• 1998 Greens decision to increase fuel price to 5
  DEM/liter (2,56 /l) shocked people, but caused
  3. Round of debate
• 1998 ETR became an important issue in the
  election campaign
• 1999 ETR was introduced when red-green government
  came into power
• 2002 Government and ETR were confirmed in
  elections

7
Targets and Reductions in EU

• EU Target -8 (1990-2008/12)
• EU Target sharing
• Reductions Lux -28 , D and DK -21, A -13,
  UK -12,5 , B -7,5 , IT -6,5, NL -6
• Stabilisation F und FIN
• Increase limitations SWE 4, IRL 13, ES
  15, GR 25, P 27.
• The target sharing shall take into account
  differing geographic, climatic, economic and
  social points of departure.

8
(No Transcript)
9
Measures on EU level

• European Climate Change Programme (ECCP)
• 6. Environmental Action Programme (6. EAP)
• EU-wide Emissions Trading
• Energy Taxation
• Ecolabelling for CO2-emissions of cars
• Several other Directives and Measures

10
Greenhouse Gas Targets of Germany

• Internationally Binding Reduction of 6 Kyoto
  Greenhouse Gases
• Target (1990-2008/12) -21
• Achieved (1990-2000) -18,7
• --------------------------------------------------
  -----------
• National Voluntary Reduction of CO2-Emissions
• Target (1990-2005) - 25
• Achieved (1990-2000) -15,3
• --------------------------------------------------
  -----------
• ? National Climate Protection Programme
  comprising many measures for all sectors to
  achieve targets

11
Measures in Germany (1998-2000)

• Measures 1998-2000 i.a.
• Ecological Tax Reform,
• Renewable Energy Act (EEG),
• 100.000 Roofs Photovoltaics-Programme (350 MW),
• 190 mio.--Promotion Programme for Renewable
  Energy
• Result Likely Reduction by 18-20 until
  2005/1990
• (Target -25 until 2005/1990)

12
National Climate Protection Programme (I)
Scenarios/Targets

• Against the national climate protection target
  5-7 ( 50-70 mio. t CO2) will likely be missing
  until 2005
• National Climate Protection Programme (10/2000)
  thus sets sector-specific targets for 1998-2005
• Private households/buildings -1,8-2,5-points
• Energy/industry -2,0-2,5-points
• Transport 1,5-2,0-points

13
National Climate Protection Programme (II) -
Measures

• Extension of combined heat-and-powerTarget
  additional CO2reduction by 10 mio. t until 2005,
  and by 23 mio. t until 2010
• Energy savings ordinanceTarget Reduction of
  energy consumption of new buildings by 30
  against the current standard, now based on a
  primary energy approach.
• Programme for the renovation of building
  stockTarget Reduction of CO2-emissions by 5-7
  mio. t until 2005.

14
Environmentally Damaging Subsidies (EDS)
Definition and Volume in Germany

• Definition is difficult and tricky
• All subsidies (expenditures and tax expenditures)
  that contribute to damaging the environment
• EDS also comprises the non-internalisation of
  external costs as it is a subsidy to the
  market-economy
• No official volume estimations,studies between
  2.1 and 43 billion p.a. (FiFo/FoE)
• 19th Government Subsidy Report General
  subsidies21.4 bn 8.2 expenditures and 13.2
  tax expendituresBut a limited scope E.g.
  commuters tax reduction of 3 bn. is not included

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National Climate Protection Programme 2000

• Ecological Tax ReformInternalising external
  costs reducing subsidies to the market-economy
• National Allocation PlanOverallocation could be
  considered as subsidy, however none takes place
  in Germany. In fact, real reductions have to be
  achieved.
• Promotion of rail transportProviding for a level
  playing field by catching up investment
  unbalancesInvestment of 1 bn. p.a. in rail
  infrastructure
• Transport-related measuressuch as the heavy
  vehicle charge on motorways to be introduced by
  2005 (initially in summer 2003).
• Update of the National Climate Protection
  Programmeforeseen for 2004 (initially by 2003,
  postponed due to ETS)

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Features of ETR in Germany (I)- Regular Rates

• Steady increases in 1999-2003
• Electricity tax 1.02 Ct/kWh in 1999 (0.26 Ct/kWh
  p.a. between 2000-2003)
• Mineral oil taxes on transport fuels 3.07
  Ct/litre p.a. between 1999-2003)
• Single increase in 1999 and 2003 only
• Tax on natural gas 0.16 Ct/kWh 0.202 Ct/kWh
• Tax on light heating fuel 2,05 Ct/litre

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Features of ETR in Germany (II) Reduced Rates

• To take into account industrys concerns about
  competitiveness
• To promote environmental measures (overall gt 10
  of total revenues for environmental purposes)-
  local public transport- track transport-
  natural gas in the transport sector- low-/no
  sulphur containing fuels- efficient power plants
• To ensure revenue neutralityReduction of
  employers and employees social security
  contribution by overall 1.7-points

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1. Competition - General options for consideration

• Eco-efficient industries benefit and make the
  economy less dependent on fossil fuels
• However, energy-intensive industries are strongly
  opposing as they fear a loss of competitiveness
• Means of mitigating potentially negative impacts
• Exemption of branches/ companies/energy products
• Process/Product/Site specific tax rate
  differentiation
• Reduced rates/ limited tax burden/setting a cap
  on losses
• Border tax adjustment
• Recycling of revenues (labour/capital tax cuts
  lump sum rebates)
• Gradual implementation
• Investment grants/energy efficiency/renewables

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3. Employment

• No exodus of industry, branches or companies so
  often feared occurs with an intelligent concept
  for ETR. Rather it has a tendency to secure jobs
  and create new ones (Double Dividend).
• Netherlands and Denmark seem to have achieved
  this, Germany appears to be on its way towards
  meeting this objective, too.
• short term effects relatively low, but
  positive.
• long term effects could be greater.
• An ETR alone cannot be expected to remedy the
  major unemployment problem (in the EU).

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2. Equity - General Options for consideration

• Environmental taxes can have both progressive and
  regressive impacts. It depends on the kind of tax
  and the kind of impacts taken into account
• Means to mitigate potentially negative impacts
• Reduction in other taxes and charges
• Reduction of public transport fares
• Conversion programme for households with electric
  heating
• Increase of childrens allowance
• increase of income tax-free threshold
• Exemption of private households
• Promotion programme to increase energy
  efficiency

21
ETR in Germany - Experiences (I)

• Coincidence witha) a drastic increase of world
  oil prices and strengthening of USDb) a
  decrease of electricity prices due to
  liberalisation
• Use of revenues for non-environmental purposes is
  neither really understood nor appreciated
• Though business is treated generously, opposition
  continues due to pretended non-agreement with
  principles.
• Equity concerns of population are very dominant
• Protests in autumn 2000 made government stand
  firm on the continuation revenue-raising
  function turned out to be crucial.
• However, a single heating cost grant for
  low-income households and a tax level playing
  field for all commuters was provided.

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ETR in Germany - Results

• In 2000 transport fuel sales decreased by 2.8,
  in 2001 by another 1.0, in 2002 by additional
  2.3 and in 2003 by 3.5. All this happened for
  the first time in three subsequent years against
  an upward trend since 1950!
• Demand for car pooling increased by 25 in the
  first half year of 2000, in 2001 22, in 2002
  8, in 2003 15.
• The number of passengers in the public transport
  system increased in 1999 for the first time
  (0.4), additional 0.8 in 2000, another 0.8 in
  2001 and again 0.5 in 2002, in 2003 1.5
  against a downward trend for decades before.
• Macroeconomic StudyJob increase predicted of up
  to 250,000 until 2003, due to reduced labour
  costs, but also due to increased investment in
  energy savings.CO2-emissions and energy
  consumption will be reduced by 2-3 until 2003

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Experiences in D with high oil prices

• Empirical evidence during the oil price shocks in
  the 70ies showed high energy prices are a motor
  for efficiency, export and partial economic
  growth
• Average growth of products
• for rational and economical energy use 4,6
  p.a.
• of the entire manufacturing industry 2,6
  p.a.
• Average growth of products for exports
• for rational and economical energy use 9,0 p.a.
• In total
  3,9 p.a.

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ETR Campaignby the German Environment Ministry
2000-01 (I)

• Posters and advertisements (in Berlin) 4 images
  What are the benefits of the ecotax (see
  http//www.bmu.de ? Climate Policy/downloads)
• Postcards for a competition about the best
  ecotax-justification (Winner More candlelight
  dinners I will switch off the light for dinner
  to save energy) price three-day trip on an
  organic farm

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ETR Campaignby the German Environment Ministry
2000-01 (II)

• Flyer The ETR (3rd edition in 2003)
• Advertisement of the flyer
• Cinema/video-spot Save fuel / Climate
  Protection it won the Global Media Award in
  Gold
• since August 2001 in entire D in 640 cinemas from
  December 2001 also in Turkish translation on TV
  (turkish channel) and available in English
• Internet-Supply
• Press Releases, Background information,
  Advertisement-images (also as download),
  cinemaspot, ETR-calculator, Links, many
  presentations at conferences/workshops

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ETR in D in the Context of the long road of ETR
on EU-level

• 1992 CO2-/energy tax from 3 USD up to 10
  USD/barrel in 1993-2000, on top of existing
  energy taxation, revenue neutral, special rates
  for energy-intensive industries, dependant on
  similar measures in other OECD-members -
  environmental rationale for tax proposal
• 1995 CO2-/energy tax proposal made more flexible
  in terms of timing and rates.
• 1997 extension of existing mineral oil minimum
  tax rates (since 1993) to all energy products and
  increase in three steps (1998-2002).
  Harmonisation of tax levels as rationale
• 2001 CO2-/energy tax proposal from 1992/5
  officially withdrawn by the EU-Commission
• 2003 Intensive negotiations on the 1997-proposal
  under the last Presidencies came to a political
  agreement on 20th March 2003 it now enters into
  force on 1.1.2004
• 2004, 1st May Entry into force of transition
  periods for new Member States

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Features of ETR in Europe

• Announced and predictable for 2 years
• Small steps, no sudden changes with a
  shock-effect to allow for adaptation
• Mostly revenue-neutral by introducing /increasing
  energy/CO2-taxes as the major element
• Sometimes complemented by other environmental
  taxes such as on waste, chemicals and land use
• Almost always accompanied by reducing social
  security contributions (SSC) or direct taxes.

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European countries at the forefront

• Comprehensive ETR
• Denmark 1992/3/6/2000-2
• Netherlands 1991/96/2001
• Norway 1991/1997/9
• Sweden 1991/3/7/2000/1
• United Kingdom 1993/6/2001/3
• Elements of an ETR
• Finland 1990/7 (introduced the first CO2-tax in
  1990 worldwide!)
• France 2000/1
• Germany 1999-2003
• Italy 1999-2005
• Switzerland 1997/2004
• Modest approaches to an ETR
• Austria 1996/2004
• Belgium 1993
• Slovenia 1997/1998

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Features of political agreement on EU energy
taxation (I)

•           (first) increase of minimum energy tax
  rates on mineral oils (in place since 1993), on
  diesel a further increase in 2010.
•           Introduction of minimum energy tax
  rates on electricity, natural gas and coal
•           Depending on the kind of use
  (propellant or heating fuel) different energy tax
  rates apply.
•           Other uses (as raw material, for
  chemical reduction, for electrolysis, for
  electricity generation, waste/use heat) are not
  subject to this energy tax directive

30
Features of political agreement on EU energy
taxation (II)

•           Commercial use and the use for heating
  can mostly taxed at lower rates than
  non-commercial use and use as propellant.
  However, private households may be exempted.
•          for non-energy intensive companies the
  energy tax rate may apply only 50 of the minimum
  tax rates
•          for energy intensive companies the
  energy tax rate may apply 0 of the minimum tax
  rates
•          However, at least for both an
  energy-related environmental agreement or
  emissions trading must apply.
•          Energy intensity is defined via two
  optional indicators- energy sales/production
  value must be at least 3- national energy
  tax/value added must be at least 0.5

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Features of political agreement on EU energy
taxation (III)

•          Diesel tax rate may be differentiated
  according to commercial and non-commercial use,
  particularly in order to reduce the difference
  between mostly higher gasoline tax rates and the
  non-commercial use of diesel. National tax rates
  applied on 1.1.2003 must not be surpassed
•          France and Italy have to increase its
  tax rates on diesel for commercial use again
  (after reductions were provided in 2000) up to
  the regular tax level by 2005.
•            UK as it has the worldwide highest
  rates on diesel may reduce these taxes if it
  applies a road charge on commercial
  vehicles/lorries as long as the overall burden is
  not lowered. Such plans exist for 2006. Currently
  taxes on diesel and gasoline are equal.

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Features of political agreement on EU energy
taxation (IV)

• Tax rates may be differentiated, if the
  quality justifies for that (e.g. environmental
  reasons such as the content of sulfur) and the
  minimum tax rates are obeyed.
•    Though there is still an obligation to exempt
  fuels for international flights and shipping
  (e.g. due to Chicago Convention from 1944), fuel
  for flightsa) within Member States (domestic
  flights) andb) between two Member States, which
  bilateral air service agreement allows for that,
  may now be taxed.The bilateral air service
  agreements do not yet allow for it, but they are
  easy to change if the political will is given.
•         

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Features of political agreement on EU energy
taxation (V)

•    For renewables (heating/transport fuels and
  electricity), energy products for pilot projects,
  track transport and inland shipping the tax rate
  may be reduced down to 0.This is an extension of
  current rules as so far a time limitation of this
  exemption was foreseen for 2004-2012.
•    For energy products, used in agriculture,
  forestry, horticulture and fishing, tax rates may
  be reduced to 0.
•    Apart from these general provisions many
  exemptions and transition periods for single
  Member States are granted, so that many tax rates
  have to be achieved only by 2007 or even 2012.
•    By 1.1.2012 at the latest, the Council has to
  decide on minimum tax rates from 2013 on, based
  on a report and proposal from the EU-Commission.
•    The directive will enter into force by
  1.1.2004.

34
Features of political agreement on EU energy tax
(VI)Diesel tax rates of EU-Member States and
Accession Countries
35

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Features of political agreement on EU energy tax
(VI)

• Werte gerundet in /1.000 l, Steuersätze Stand
  Juli 2003, Quelle KOM

• Neuer Mind.-satz ab 2010 330

• Neue Mitgliedstaaten 2004

• Neuer Mind.-satz ab 2003 302

• EU-15

• Neuer Mind.-satz seit 1993 245

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Features of political agreement on EU energy tax
38
Features of political agreement on EU energy
taxation (VII)

• Overall, the political agreement on the directive
  can be considered as an important political,
  partly symbolic, partly substantial success.
• Since 1992 the EU-Commission has proposed three
  draft directives (1992/1995/1997) of which only
  the latter after years of debate (and watering
  down) due to unanimity the voting requirement has
  been adopted.
• The forthcoming accession of further Member
  States has increased the pressure to come to an
  agreement. But referring to environmental
  targets, the directive is very modest and will
  only have minor environmental, though positive
  impacts.
• . Given the requirement for unanimity voting it
  is an important step towards a more harmonised
  energy taxation.

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Features of political agreement on EU energy
taxation (VIII)

• The biggest advantage is the establishment of the
  principle of energy taxation in the EU and the
  requirement for accession countries, but also for
  some current Member States to introduce/increase
  energy tax rates.
• Moreover, aviation may now be taxed within
  certain restrictions an important step towards
  more justice and the polluter pays principle. The
  possible combination with emissions trading and
  other instruments is also to be seen positive.
• Overall, the agreement and its content points at
  the deficits and lacks of the current requirement
  for unanimity voting in fiscal policies.

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Barriers to the adoption of EU-proposals

• Unanimity voting required of all 15 EU-Member
  States
• Until recently Spain, and now still other
  cohesion countries (Ireland, Portugal, Greece),
  but also UK (LUX) oppose
• Impacts on competitiveness, economic growth,
  equity, inflation, environment and loss of fiscal
  sovereignty are mentioned as major reasons
• Attempt to change unanimity voting into qualified
  majority voting (3/4) at Nice Summit in December
  2000 failed. Still this or the adoption of the
  proposal is crucial before the accession of about
  12 candidates countries as it would then become
  part of the acquis communitaire which the
  accession countries would have to comply with
• ? Several MS went ahead due to no progress on
  EU-level

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Requirements for the Design of ETR1. Strong and
societally attractive and fiscally motivated
alliance (e.g. job creation)2. Small,
predictable steps for several years which are
fixed in the law from the very beginning.A
single increase every few years and the abolition
of environmentally harmful subsidies becomes more
attractive after the autumn 2000-experiences.3
. Revenue neutrality - including tax expenditures
for the environment tends to be less urgent as
the double dividend approach is not always
understood4. First environmental impacts should
already be reached in a short term (due to public
expectations)5. Take equity and competitiveness
concerns into account
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Requirement for the Promotion of an ETR

• ETR should be part of a fiscal policy package and
  communicated as an important element, not as a
  stand-alone tax measure.
• Tax expenditures for the environment should be
  communicated as environmental promotion
  programmes and as a way of revenue spending
• Environmental impacts should be examined and
  communicated broadly as a major success.
• Winners should be identified and asked to support
  ETR publically and demonstrate the benefits it
  brings in terms of innovation, job creation
• Use those elements to form an acceptance
  buildings/information/image campaign on ETR

43
Conclusions

• Positive environmental impacts, economic benefits
  and innovations could be achieved, most clearly
  due to the ETR.
• Implementation of further targeted
  environmentally harmful subsidy reductions turns
  out to be very difficult given strong lobbyism
  and political constellations
• Hard coal subsidies in Germany are a specific
  case
• Potential natural alliances between Finance and
  Environment Ministries for reducing
  environmentally damaging subsidies are not yet
  always realised.
• Budget constraints and the Euro-Maastricht
  criteria help to focus on reducing subsidies

44
Perspectives for ETR

• More countries in Europe will follow now that
  the Kyoto Protocol is being ratified by the EU
  (and others) since it is apart from emissions
  trading a very effective and cost-efficient
  tool to combat climate change
• This will tend to increase chances for
  harmonisation and further tax increases
• Increased taxation of industry, e.g. linked to
  energy audits or emission trading schemes,
  particularly for energy-intensive industries.
  UKs climate change levy and DKs long
  experiences offer room for manoeuvre.
• Increased use of revenues for the promotion of
  environmental measures
• Better embodiment of ETR in a policy package to
  overcome non-fiscal/-price barriers and generally
  broadening the scope to an Ecological Fiscal
  Reform.

45
General Perspectives for EnvironmentalFiscal
Reform

• In addition to energy as a major environmental
  tax base, land use, waste and fertilisers and
  pesticides, raw materials, appear to be the next
  favourite bases
• Emissions based annual road tax, favouring also
  low-consuming cars
• Proposal for modification of the land tax
  according to the land use.
• Shifting focus to environmentally damaging
  subsidies and other environmentally distorting
  tax provisions
• More sustainable support for buildings and
  commuting
• OECD/Germany conference on 27 June 2002 in Berlin
  on EFR http//www1.oecd.org/env/fiscalreformconf
  erence/ and
• http//www.bmu.de ? Reden

46
Environmental Fiscal Reform in the coalition
agreement 2002 in general

• Green Budget Reform (GBR) and Environmental
  Fiscal Reform (EFR) are used synonymously.
• EFR/GBR comprises
• 1. structural adaptations of existing taxes (e.g.
  ETR-reductions)
• 2. reduction of environmentally damaging and
  macro-economically questionable subsidies,
  including tax expenditures
• 3. increased spending for environmental purposes

47
Environmental Fiscal Reform in the coalition
agreement 2002 in detail

• Support for building new houses will be reduced
  to the level of that for buying existing houses
  and concentrated on families. A supplement shall
  be further available for environmentally advanced
  measures.
• The annual car tax will be based on CO2-emissions
• On EU-scale D will push for a kerosene tax for
  aviation.
• VAT-exemption for flights into EU-MS will be
  abolished.
• Restructuring of the German hard coal mining
  sector will be continued. Subsidisation of the
  German hard coal sector will be ensured for the
  period 2006-2010. The contribution from the
  federal budget which is at 3.05 billion
  nowadays and which will be reduced to 2.17
  billion by 2005 will be developed further in
  a degressive manner.
• 2005 VAT-rate on public passenger transport for
  long-distances will be reduced from 16 per cent
  to 7 per cent.
• More revenues will be spent on renovating
  buildings and promoting renewables.
• Adjustment/Phasing out of some ETR reductions

48
ETR-adjustments in Germany from 2003 on

• Reduction of environmentally damaging tax
  reductions for
• - industry (now a positive marginal tax rate)
• - night storage heatings (phase out by 2007)
• Adaptation of the gas tax to the level of the
  light heating oil based on CO2/energy content
• Increased use of revenues for building stocks
  renovation and shift away from night storage
  heatings prolonged tax reduction for natural gas
  used in the transport sector until 2020 for
  ensuring investment certainty.

49
General Guidelines for Fiscal Reform Decision by
Government 2003 and 2004

• New subsidies should only be
• - provided as expenditures, but no longer as tax
  expenditures.
• - provided for a certain, fixed time period
• Existing subsidies should be phased out.
• They have to be justified every year during the
  budget consultations
• However, no particular mention of environmentally
  damaging subsidies any more.
• A bi-yearly subsidy report offers monitoring,
  though no explicit mention or evaluation of
  environmentally harmful subsidies

50
Political process of reducing EDS

• 1.2. (structural adaptations of existing taxes
  and EDS)? 2002/3 Tax expenditure reduction law
  (including ETR), but it was blocked by opposition
  in the Upper House
• In a mediation Committee it was agreed
  according to the Koch-/Steinbrück-Paper to
  lower all subsidies by the same percentage (4
  p.a. in 3 years or 12 in one year).
• But it did not comprise all subsidies,
  particularly critical ones like ETR-reductions,
  hard coal subsidies and road infrastructure
  expenditures were not included, while rail
  infrastructrue expenditures and programmes for
  renewables were included
• For the year 2004 a review is foreseen in order
  to assess if and how energy taxation will be
  further developed according to environmental
  aspects, given the environmental impacts, the oil
  price, the macro-economic development, the
  competitiveness of German industry and the social
  impacts.

51
Implementation progress of EFR-measures in the
coalition agreement

• Measures agreed Extent of implementation
• Support for building new existing houses only
  slightly ?
• Annual car tax on CO2-emissions no longer a
  priority ?
• EU-kerosene tax for aviation at least option
  available o
• Abolish VAT-exemption for flights into
  EU-MS blocked, waiting for EU ?
• Reducing German hard coal subsidies high level
  until 2012 ?
• More revenues for buildings and renewables slight
  progress o
• Adjustment/Phasing out of some ETR
  reductions implemented since 2003 ?
• Reduction of VAT-rate on rail transport to be
  decided for 2005 o ?
• 4 x ? 3 x o 1 x ?
• Summary mixed picture and several measures left
  for taking action

52
Perspectives for ETR

• Very difficult to implement further ETR-steps
  on transport fuels given the high level of
  taxation and nine neigbhouring countries.
• More likely to increase taxes on heating fuels
  and/or electricity since tankering hardly takes
  place.
• Implementation of the EU energy taxation
  directive (particularly introduction of coal tax
  for heating purposes, abolishing the gas tax for
  electricity generationpossibly tax supplement
  on sulphur-rich light heating fuel,introduction
  of a national kerosene tax)
• Increased taxation of industry, e.g. linked to
  energy audits or emission trading schemes,
  particularly for energy-intensive industries.
  UKs climate change levy on business only and
  DKs long experiences, but also signals for moves
  of Hungary offer room for manoeuvre.
• Increased use of additional revenues for the
  promotion of environmental measures
• Better embodiment of EFR in a policy package to
  overcome non-fiscal/-price barriers

53
Contact

• kai.schlegelmilch_at_bmu.bund.de
• Tel. [phone]
• Fax [phone]
• http//www.bmu.de
• http//www.bmu.de/oekologische-finanzreform
  (information in D, E, FR, ESP)
• THANK YOU VERY MUCH FOR YOUR ATTENTION!