The Eighth Annual Global Conference on Environmental Taxation
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Impact of the ecological tax reform in Germany

Kai Schlegelmilch, Green Budget Germany

In 1999, the German government introduced an Ecological Tax Reform (ETR) and has further developed it by sub-sequent energy tax increases and labour cost reductions until 2003, structural elements were changed thereafter.
The impacts of the ETR have been studied intensively in different analysis. Hence, macroeconomic and microeconomic analyses of the impact of the ETR are available, but also statistics indicating the impact of the ETR without attributing the development by 100% to the ETR. This paper draws on these findings.

Macroeconomic impacts:
The ETR has slightly increased GDP growth by 0.1%-0.2% p.a.. Furthermore the number of jobs has increased by up to 250.000. CO2-emissions and energy consumption were reduced between 2-3% against a business-as-usual-scenario without an ETR.

Sectoral impact:
The impact on the transport sector is the most obvious, not at least given that the price signals were the strongest. The CO2-emissions and the fuel sales in Germany were reduced by 17% between 1999 and 2005. And the number of passengers using public transport increased by overall more than 5%. In addition, the number of users of car-sharing increased substantially, however also reflecting the much smaller basis. The share of new cars, consuming 3-5-liter, has increased: From 1,0 % in 1998 to 4,6% in 2003.
Overall after 50 years of practically steady growth of CO2-emissions in the transport sector with the year 2000 and subsequent ones until at least 2005 a turn around has been achieved. This turn has hardly been expected, but the coincidence with the increasing world oil prices and the public awareness contributed to that.

Table 1: Impacts of the ETR and oil prices on the transport sector in Germany (in %)

  Transport fuel sales decreased   Passengers of public transport increased  Users of Car-Sharing increased 

























Microeconomic impact:
In order to demonstrate the positive impacts of ETR on company level, the impacts on the ETR sixteen companies of most sectors and of all sizes were chosen for evaluation. They benefited from enhanced market opportunities, eco-efficient innovations, reduced energy costs and tax rates for environmentally-friendly technologies and thus overall increased competitiveness. The behaviour of private households was also influenced substantially.
Reference for all studies:



The contribution of ETR to EU growth and employment: ex post  evidence from ETRs in 6 EU Member States 1995-2010

Terry Barker, Director, Cambridge Centre for Climate Change Mitigation Research (4CMR), Department of Land Economy, University of Cambridge and Chairman, Cambridge Econometrics, Ltd.

In an Environmental Tax Reform (ETR), taxes are introduced or raised on activities that are associated with pollution or environmental degradation, and the revenues are used to reduce taxes on activities associated with benefits to the environment or more usually the economy. There is a considerable theoretical and empirical literature on such reforms, starting in the early 1990s. However, there has been until recently no systematic multi-country ex post study of ETRs in practice
The presentation reports the results of such a study. Several EU countries have led the world in introducing a series of ETRs.  Finland was the first, followed by Sweden, Denmark, Holland, Germany and UK, mainly with tax reforms that shifted taxation from labour to pollution. Over the years, CO2 and energy taxes have gradually been raised, so that taxes of more than EUR 25 billion a year have been shifted. The implementation of these ETRs in the EU has been studied in a joint DG Tax and DG Research Project (COMETR ) funded under FP6 and coordinated by Professor Mikael Andersen of the National Environmental Research Institute, University of Aarhus. The project reported earlier in 2007.
The presentation will cover the methodology and macroeconomic findings of the project, using the well-established Energy-Environment-Economy model of Europe (E3ME) developed by Cambridge Econometrics and other European partners. In five of the EU countries, the results show that CO2 and energy taxes, recycled via reductions in labour and other taxes over the last 17 years have made a small but positive contribution to economic growth of up to 0.5 per cent, at the same time environmental performance has improved. Some conclusions from the study will be drawn for a co-ordinated EU-wide ETR that could make a substantial contribution to the EU achieving its 30% GHG reduction target below 1990 levels by 2020 (the target being conditional on other countries also acting).



Environmental Policy, Congestion and Land Use

Prof. Alberto Majocchi, President of ISAE – Rome

In the paper the problem of land use and its associated environmental problems, and the use of spaces, that are becoming more and more scarce, will be addressed. A particular emphasis will be devoted to the difficult issue of urban congestion. There are different instruments that could be considered in this field: congestion charges, road pricing, parking fees for residents and commuters.
The revenue should be devoted to improving the public transport system up to the point where private cars could be excluded as a means of transport in the urban area. Hence, in the short run, there is no possibility of using the revenue - that is earmarked - for reducing other distortionary taxes, and in the long run the tax base will be eroded by the reduction of urban traffic.
An important role in the solution of the problems of congestion must be played by urban planning. Most important are choices regarding residential and working places, but equally important is the location of commercial sites. In particular, the diffusion of big boxes outside the city increases traffic flows, has a considerable cost for the elderly, and reduces the security of the inner city. One instrument that could be used to cover the external costs of big boxes is a very high parking fee.
The flow of tourists using particularly worthy spaces is constantly increasing with large private benefits, but with huge costs for the municipalities involved. Economic instruments – similar to the “taxe de sejour” or the Aufenthalts Abgabe in Südtirol– could be implemented to erode the profits of private individuals and cover the costs of the public authorities.
Finally, land conservation is largely dependent on environmentally friendly agriculture. In this context, the problem of the envi-ronmental risks of bio-fuels should be addressed and, in any case, the use of subsidies to promote this kind of energy source should be avoided, while the best way to support carbon-free energy is represented by a technologically neutral carbon tax.