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The use of tax allowances to reduce competitive disadvantages resulting from ecological tax reform

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  1. Cf. S. Bach, M. Kohlhaas, B. Praetorius, Ecological Tax Reform even if Germany has to Go it Alone, in:Economic Bulletin, vol 31, no. 7, July 1994.

  2. The full report is available in German

  3. This has been proposed by the working party on ecological-social tax reform of the German Greens (Bündnis 90/Die Grünen).

  4. Transport fuel was not incorporated into the tax concessions.

  5. The course of the progression used to calculate the reduction is as follows:-up to an energy tax intensity of 2%, no reduction is granted (basic energy consumption subject to standard rate of energy tax);-for an energy tax intensity of between 2% and 3%, the marginal tax burden is reduced to 70%;-for an energy tax intensity of between 3% and 4%, the marginal tax burden is reduced to 50%;-for an energy tax intensity of between 4% and 5%, the marginal tax burden is reduced to 30%;-for an energy tax intensity of 5% and over, the marginal tax burden is reduced to 10%. This means that the average tax burden (with respect to gross value of output), compared to the standard rate is 3.5% instead of 5%, 4% instead of 10%, 4.5% instead of 15%, 5% instead of 20% and 6% instead of 30%.

  6. The proposal was for a general tax on energy to, which all forms of fossil fuel and electricity would be subjected according to their energy content; regenerable sources of energy remain tax-free. Under the proposal the rate of tax increases progressively over the long term. In the first year it amounts to DM 0.63 per gigajoule (gj) or DM 18.46 per tonne of coal equivalent (tce), in the fifth year DM 3.62 per gj or DM 106.18 tce and in the tenth year DM 8.70 per gj or DM 255.10 per tce. The average increase in the cost of energy consumption in the economy as a whole is thus 4.5% in the first year and by 58% in the tenth year.

  7. This estimate is cautious to the extent that no additional investment in housing construction (insulation, heating systems) were taken into account. It is difficult to estimate the order of magnitude of such investment. On the other hand there is the danger that if energy taxes are introduced, some investment projects in energy-intensive areas will not be implemented.

  8. Just less than half the additional jobs are filled by people previously not registered as unemployed.

  9. H.-J. Ziesing, Climate Change Policies in the Wake of the First UN Conference of the Parties in Berlin, in:Economic Bulletin, vol 32, no. 7, July 1995; H.-J. Ziesing Energy Consumption and CO2 Emissions in Germany in the First Half of the 1990s, in:Economic Bulletin, vol 33, no. 4, April 1996

  10. M. Kohlhaas, B. Praetorius, H-J. Ziesing, German Industry's Volntary Commitment to Reduce CO2 Emissions—No Substitute for an Active Policy Against Climate Change, in:Economic Bulletin, vol 32, no. 5, May 1995.

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  1. Stefan Bach
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  2. Michael Kohlhaas
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  3. Bernhard Seidel
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Bach, S., Kohlhaas, M. & Seidel, B. The use of tax allowances to reduce competitive disadvantages resulting from ecological tax reform. Economic Bulletin 34, 17–28 (1997). https://doi.org/10.1007/BF02671719

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