German corporations divided on carbon price

Several corporations could benefit from a carbon tax – others fear for their competitiveness. [Sergey Molchenko/ Shutterstock]

In a debate on the potential introduction of a carbon price, an increasing number of German company associations are voicing their thoughts. Some fear their competitiveness would take a hit, while others are excited about new business opportunities. EURACTIV Germany reports.

If a price on carbon is to be introduced this year in Germany, it needs to essentially do one thing: set a strong signal so that companies promote climate-friendly investments, urged the German corporation initiative for energy efficiency, DENEFF.

The revenues of the tax should be used to specifically support taxpayers and affected corporations in saving energy. They should not, like in the case of the eco-tax, go into the country’s general budget.

DENEFF’s statement is shared by others. An increasing number of corporations currently argue in favour of a carbon tax because they hope for more security in future planning and the development of new business areas.

In politics, a lively debate has erupted on what a price model for carbon will look like. Other EU member states such as the UK, Ireland and Sweden have already implemented their own models.

Germany needs to get its climate protection regulation off the ground before the end of the year. By summer, German Christian Democrats (CDU) and Social Democrats (SPD) are set to develop their own concepts on how such a pricing mechanism will be implemented.

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Christian Noll, managing director of DENEFF, is convinced that “the price of carbon alone is not a panacea.” It can only help reach requirements prescribed by the regulation if other measures to increase energy efficiency are taken.

Noll hopes that policies will focus on tax incentives, minimum standards and targeted funding programmes. These should incentivise corporations and citizens to implement energy-saving solutions. For example, by reducing the possibilities of depreciation of certain investments in the industry, as this was very efficient in the UK and Ireland.

“The problem is that corporations essentially only invest in their core business. If implemented without supplementing measures, the price of carbon should be so high that investments in energy efficiency would make sense,” Noll told EURACTIV.

Whoever produces more carbon should pay more

If the price on carbon is implemented as a direct tax or if the EU trade system for emission certificates is expanded, the consumer will be paying the price. Whether the taxpayer should be unburdened in other areas is still debated as various models are currently being tested. Either that or the principle of responsibility should be applicable, according to Noll.

Whoever produces carbon should also pay more but there should be limits because consumers are not always responsible. For example, a tenant cannot be held responsible for the poor carbon footprint of non-refurbished buildings.

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Some business representatives are also supportive of the idea of a consumer-based model. The auditing firm Deloitte argues that taxing consumption would put climate policy “back on its feet”, as renewable energy would be relatively cheaper and shifting the tax burden would benefit the transition towards electrifying transport and heating.

Industry linked to German leading parties clearly against a price on carbon

Not every business representative supports the idea of a price on carbon. The Federation of German Industries (BDI) is especially concerned by the competitive strength of German corporations. In Germany, electricity prices set by the industry are already higher than in any other EU member state, according to one of the Federation’s press releases.

With the introduction of a price on carbon, German corporations would have a competitive disadvantage at an international level as energy-intensive companies could relocate their seat abroad. Pricing CO2 is therefore only sensible as long as energy prices are not increased.

This week, the CDU/CSU joint association of small and large businesses (MIT) actively resisted the idea of a price on carbon.

Its chair, Carsten Linnemann, told the German newspaper Passauer Neue Presse: “A national CO2 tax would be an additional burden on companies and citizens, with its climate policy benefits being questionable.”

He highlighted the ‘gilets jaunes’ in France as a poignant case in point.

[Edited by Zoran Radosavljevic]

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