German tax policies obstruct the transition to a low-carbon economy

According to a study that was conducted by Green Budget Germany (FOS) and commissioned by the Bertelsmann Foundation, contradictory tax incentives are a significant barrier to the process of making the German economy more friendly to the environment. According to the findings of the investigation, the existing tax legislation “frequently set incorrect incentives and restrict innovation in the field of sustainable technology,” which works against the goal of facilitating the energy transition.

The authors deplore the fact that Germany’s tariff on electricity does not differentiate between power that is produced with fossil fuels or electricity that is produced with renewables. As a result, there is no incentive to switch to solutions with lower emissions. In the case of the tax on energy, the specialists criticize the paradoxical incentives that are created as a result of reduced taxes on diesel and heating oil, which are particularly high in emissions in comparison to gasoline and natural gas.

In addition, the authors criticize the absence of incentives that are being offered to transition towards a circular economy. According to the next section of the paper, “There are virtually no fiscal instruments available to date to direct resource consumption in Germany towards a level that is sustainable.” The authors suggest the adoption of a major building materials tax in addition to the fiscal support of corporate resource management as a means of making new raw materials more expensive and, as a result, making recycling raw materials a far more economically appealing endeavor.

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