The Green Brief: EU lessons from Germany’s carbon tax row

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A row in Germany over a carbon tax on heating and transport fuels has revealed some of the issues that Europe may soon be confronted with when extending its own carbon market to road transport and housing.

As of January 2021, German citizens have been paying an extra seven cents per litre of gasoline. Despite being called a carbon price, the German system is inflexible and functions more like a carbon tax rather than a flexible price system.

By 2025, the German carbon price is set to reach an extra 15 cents per litre of gasoline, after which it will become free-floating and thus market determined.

In their election programme, the German Greens wanted to push up the tax to 16 cents per litre by 2023, instead of an additional 10 cents per litre, which was required under the law.

With German gasoline prices averaging 150 cents per litre in 2021, the Greens’ plan would have resulted in an effective price increase of less than 5%, something they portrayed as a minor increase for a product that is acknowledged to be harmful for the environment.

However, things turned out badly for the Greens. Their political opponents publicly savaged them, summarily accusing them of being a party of the upper-middle class.

This was immediately reflected in the opinion polls. In May, the Greens were polling at 25% and speculation was rife as to whether Germany would have its first Green chancellor after the September elections.

Two months later, their approval ratings had tumbled well below 20%.

With the carbon tax debacle, the Greens have learned a harsh lesson. As soon as a party is perceived as directly affecting voters’ bottom line, they become fair game – whether by right-wing populists trying to score easy political points, or socialists trying to regain the favour of the working class.

Another lesson is that political margins can be extremely thin when it comes to climate policy.

In France, the 2018 ‘Yellow Vests’ movement started because of a 10-eurocent increase in fuel prices. It quickly morphed into a wider protest movement that turned violent and threatened to topple the government.

So what are the lessons for Europe? According to Pascal Canfin, a senior French MEP, plans to extend the EU’s carbon market to transport and buildings would be “politically suicidal” and risk triggering social unrest similar to the 2018 Yellow Vests movement.

Worse, it risks making the European Union an easy target for the far-right, just as France enters a crucial election year with Marine Le Pen waiting in the wings.

It remains to be seen how the European Commission will design its new new emission trading scheme (ETS) for road transport and buildings.

What’s certain is that the EU executive is walking on a very tight political rope.

– Nikolaus J. Kurmayer and Frédéric Simon

 

Top stories

This week’s stories

 

News from the capitals

BUDAPEST. Commission extends examination of Hungarian recovery plan. The Hungarian recovery plan and the €7.2 billion in grants requested from Brussels for post-pandemic reconstruction continues to be examined by EU officials, the European Commission announced on Monday as the deadline for it to give its blessing expired. Read more.

BERLIN. German chancellor candidate Laschet favours CO2 pricing. The Conservative candidate to replace German Chancellor Angela Merkel after September’s election, Armin Laschet,  has said he is in favour of CO2 pricing. Read more.

PARIS. French President Macron meets auto-sector representatives. French President Emmanuel Macron will receive automobile industry representatives on Monday morning at the Élysée Palace ahead of the European Commission’s tabling later this week of a package of energy and climate laws aimed at reaching the EU’s 2030 goal of cutting emissions by 55%. Read more.

VIENNA. Austria supports European Commission in push to tax kerosene. Austria is backing the European Commission’s kerosene tax proposal as part of its Fit for 55 climate package that will be presented on Wednesday and is urging the EU executive to introduce a “fair taxation” of the transport sector. Read more.

BRATISLAVA. Survey: 60% of Slovaks prefer renewable energy to natural gas. The results of a survey by the Focus agency commissioned by the Slovak climate initiative show that imports of natural gas are preferred by 30% of Slovaks, while 60% of those surveyed prefer renewable energy-based production. Read more.

LJUBLJANA. Slovenian voters reject new waters act in blow for government. More than 86% of Slovenian voters overwhelmingly rejected a new waters act in a referendum on Sunday, with a turnout of nearly 46%, the highest for a referendum since 2007. Read more.

PARIS. Top French firms commit to climate change fight. The French Association of Private Companies (AFEP) updated on Wednesday the Ambition 4 Climate platform, which brings together the projects of 64 large companies with the aim of reaching carbon neutrality. Read the full story. 

VIENNA. Austria plans to introduce CO2 tax by 2022. Austria’s ÖVP-Green coalition is currently “working flat out” on a new eco-tax-reform that will pave the way for taxing CO2, Finance Minister Gernot Blümel told a plenary session in parliament, announcing the government’s plan to introduce a CO2 tax that will take effect in 2022. Read more.

WARSAW. Polish PM ‘disappointed’ by Turów negotiations with Czechia. Prime Minister Mateusz Morawiecki sent a letter to his Czech counterpart Andrej Babiš accusing Czech negotiators of unwillingness to reach consensus on the lignite mine in Turów, located a few kilometres from the countries’ shared border. Read more.

SOFIA. Bulgaria signs deal with German electric car manufacturers. After the German giant Volkswagen refused to build a new plant in Bulgaria, a German startup specialising in electric cars has shown interest in investing €140 million in the country. Read more.

 

News in brief

Report reveals intense lobbying ahead of Fit for 55 package. Many companies who have outwardly supported Europe’s climate goals have been advocating against ambition in the Fit for 55 overhaul of climate legislation due on Wednesday (14 July), according to an investigation by the think tank InfluenceMap.

According to the group, which tracks lobbying around environmental issues, industry groups are lobbying against short term efforts to implement Europe’s climate goals despite publicly supporting the goal of reaching net zero emissions by 2050.

“If successful, this pushback could undermine key policies that scientists say are urgently needed to credibly move towards carbon neutrality,” the think tank warns.

The analysis looked at 216 industry groups, 92% of which support reaching net zero emissions by mid-century. But only 36% support the plan to reduce emissions by 55% by 2030 – the key stat that underpins the Fit for 55 climate legislation overhaul. Read the full report here. (Kira Taylor | EURACTIV.com)

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EU Green Deal chief jets off to Asia for climate talks. Last week, Executive Vice-President Frans Timmermans, travelled to South Korea and Singapore to discuss the Green Deal and preparations for the COP 26 climate summit. While in South Korea, he met with the South Korean Prime Minister and several ministers, while in Singapore, he met with the sustainability and environment minister and others.

“This year is crucial for international action on climate change, biodiversity protection and the circular economy. Both South Korea and Singapore are key partners for the EU and we are looking forward to intensifying our cooperation on the transition to a green and healthy future, in particular in the run up to COP26,” said Timmermans.

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German economy minister corrects electricity demand forecast. The German government has revised its estimate of electricity demand for 2030 following criticism that the foreceast was incorrect. Preliminary results of the recalculation confirm the initial criticisms and show that Germany is set to be more electricity hungry than assumed.

German energy association BDEW had recently pointed out that the German ministry of energy had published overly optimistic forecasts of 2030 German electricity demands. Instead of decreasing, as envisioned, electricity demand was set to rise by a fair amount.

The new forecasts, which are expected to be finalised later this year, set German electricity consumption in 2030 at around 655 TWh (instead of 591 TWh), said Peter Altmaier, minister of the economy and energy. 

He attributed the miscalculation due to more electric vehicles set to be on German roads in 2030 than expected, from seven to ten million vehicles the experts now expect 14 million electric vehicles. Increased installation rates of heat pumps and green hydrogen production are also set to drive electricity demand.

 

Opinions

 

Upcoming events

22 JULY. #eaGreenEU Twitter chat | Forestry and climate change. Join EURACTIV’s energy and environment journalists for a live discussion on the role of forestry and climate change in the EU. Find more information, including how you can join in, here. (Supported by Life Terra)

2 SEPTEMBER. New EU emissions trading system: what should change? Join this EURACTIV Virtual Conference to discuss how the EU’s Emissions Trading System should evolve? Speakers to be confirmed. Programme and registration here. (Supported PGE)

7 SEPTEMBER. Forest restoration and tree-planting – what impact for climate change mitigation? Join Humberto Delgado Rosa, Director Natural Capital at the European Commission, Jytte Guteland from the European Parliament, Sven Kallen, Founder and Secretary, Life Terra Foundation and more to discuss the impact forest restoration and tree-planting can have on climate change mitigation. Programme and registration here. (Supported by Life Terra)

8 SEPTEMBER. Carbon removal strategy – is it needed and will it make a difference? Carbon removals have been put into the spotlight by Europe’s net emissions reduction targets. But how will policies work together to make sure carbon removals are sufficient to tackle the climate crisis? Speakers to be confirmed. Programme and registration here. (Supported by Equinor).

 

On our radar

14 JULY: Fit for 55 package. The Commission is expected to table a huge package of green legislation in July, including a revision of the renewable energy directive, a revision of the emissions trading scheme and our first glimpse at a carbon border adjustment mechanism.

20-21 JULY: Informal meeting of environment ministers. EU environment ministers will meet in Brdo, Slovenia, to discuss climate change and biodiversity. A press conference on 20 July will also see Slovenian environment minister, Andrej Vizjak, and EU Green Deal chief, Frans Timmermans, discuss the Fit for 55 package. 

21-23 SEPTEMBER: Informal meeting of transport and energy ministers, 21-23 September 2021.

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