ETR ETS Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development Seventh Annual Global Conference on Environmental Taxation Ottawa,

ETRETS

Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development

Seventh Annual Global Conference on Environmental TaxationOttawa, October 23rd, 2006

Dr. Anselm Görres – Chairman Green Budget Germany

© Dr. Görres – www.foes.de July 2006 Economic Instruments – Exhibit 2GBG


GBG commercial – and the challenge ahead

Germany’s situation in comparison

Red-Green Ecotax Reform: Facts and figures

Some lessons from the German ETR debate

A few closing remarks

Optional: Insights from the instrument debate

CONTENT OF THIS PRESENTATION


About “Green Budget Germany” and the author

Green Budget Germany (Förderverein Ökologische Steuerreform e.V./ FÖS) is a nonprofit organisation and NGO, founded in 1994.

Topics: Ecotax Reform (ETR) and Emission Trading (ETS) or more general: Environmental Fiscal Reform (EFR) including Subsidy Debate

Target Groups: Business, academic and political communities.

Publications: Many books, articles and newsletters in German in English: ÖkoSteuerNews and GreenBudgetNews.

Dr. Anselm Görres, born 1952, economist and former McKinsey consultant, is manager and entrepreneur in Munich Germany (www.zmm.de). He is co-founder and President of FÖS/GBG and since 1985, has written many books and articles about ecotaxes in Germany.

Förderverein Ökologische Steuerreform e.V.Landsberger Str. 191 • D-80687 München

Fon +49-89-520-113-13, Fax [email protected]; www.foes.de; www.eco-tax.info


Even people from “Old Europe” can have strong ties to the New World 1968/69 Exchange Student with YfU in West Des Moines, Iowa with

first trip to Canada 1982 Working five months as researcher for IMF, Wash. DC 1984 to 1991 Working with US-headquartered consulting firm

McKinsey&Company; second trip to Canada 2000 Plenary Speaker at First Global Conference on Environmental

Taxation, Cleveland, Ohio 2002 Speaker in Portland, Oregon and at Second Global

Conference in Woodstock, Vermont 2006: Economic instruments information tour through US and

Canada, supported by German MoE PS: Two of my three daughters were exchange students in the US


Readers of our two

newsletters:

• 7000 in D• 3000 abroad

...and how about you?!?

...it’s easy:www.foes.de

German edition: ÖkoSteuerNews


After some time we realized that GBG is not only an NGO but also a travel agency

Sydney

SacramentoBarcelona

Madrid

London

Prag

Krakau

Wien

Talinn

Munich

Hamburg

Havanna

VermontPortland

Ottawa

Cleveland

Vancouver

Malta

SELECTED WORLDWIDE ECOTAX PRESENTATIONS BY GBG-MEMBERS

Tokyo

Thanks a lot for helping to add further US and Canada cities to our list of destinations!

Riga

Wash.DCBostonStaBarbara


We proudly present..

The Eighth Annual Global Conferenceon Environmental Taxation:

From 18th to 20th October 2007 in Munich


Congratulations! We’ve finally come back to the oil prices of 1870!

OIL PRICE DEVELOPMENT FROM 1860 UNTIL TODAY

Every engineer knows: get out before the tub curve ends!

Lookfamiliar?


As much as we look: There‘s less and less oil in the tub

And if there were – we cannot risk to burn it all in the next few years!



Our only problem is to step from the old, fossil bathtub into the nice new bathtub of solar energy...

Fossil energy bathtub

Solar energy bathtub

Sun Energy

With ETR, ETS, and solar subsidies we’ll

make the transit faster and smoother!

TRANSITION FOSSIL TO SOLAR (1)

plus ζ =efficiency


Don’t scare people with higher prices forever – tell them about the sunlight at the end of the tunnel!

Bad energybefore ecotax

Bad energyplus ecotax

Alternativeenergy

Switching

corridor

Switching price- upper limit- lower limit Sustainable

price level

TRANSITION FOSSIL TO SOLAR (2)

Sun Energy


We’ve come to our next topic:


The challenge ahead – from bathtub to bathtub







The share of ecotaxes in total GDP is a good indi-cator for the use of market-based instruments

0,9%

1,4%

2,7%

4,0%

USA

Canada

UK

D

PERCENTAGE SHARE OF ECOTAXES IN GROSS DOMESTIC PRODUCT


The average American produces almost twice as much CO2 as the average European

20,2

18,3

12,1

11,0

11

USA

Canada

Germany

United Kingdom

EU Average

CO2-EMISSIONS PER CAPITA (IN METRIC TONS; 2005)


-15

-10

-5

0

5

10

15

20

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

The development of CO2-Emissions is very unequalCHANGES IN CO2-EMISSIONS PER CAPITA IN TONS (BASEYEAR 1993)

Reference: DIW 2005

Fuel Duty Escalator 1993-1999

German Ecotax 1999-2003


375

299

513

591

464440 422 415 396 391

406 386363 352

318 312

646

538558575601618

695667 658

625 614 617

1998 1999 2000 2001 2002 2003 2004

Europe leads in energy intensity of GDPCO2-EMISSIONS PER GDP (TONNES PER MILLION US-DOLLAR)

Reference: DIW 2006

-15%

-21%

-19%

-26%


North America has some particular problems, but also some extraordinary strenghtes Wealth and industry strongly

affiliated with old energies (Rockefeller, Bushes, Haliburton...)

Canada six-largest exporter of exploration technology

Poor population particularly vulnerable to energy price hikes (oldest cars, worst insulated homes, long commuters)

Aggressive anti-tax rhethoric of many politicians

SUVs as symbol of American Way of Life and freedom of mobility

Great tradition to live up to national and global challenges (though sometimes with delay) – Wilson, New Deal, Marshall plan, Peace Corps...

The will to renew in America is a renable resource (Al Gore)

People like Benjamin Franklin, Jeffrey Immelt, Al Gore, Arnold Schwarzenegger

Care about Environment is “in” – not only in Hollywood (“Day after tomorrow”) and California

Many ecoinstruments have been invented in USA (ET, fuel consumption limits)


“Americans can always be counted on to do the right thing ... after they have exhausted all the other possiblities.”

Attributed to Winston Churchill

Source: Robert J. Samuelson – An Oil Habit America Cannot Break. Washington Post, Oct. 18, 2006


Energy taxes in Germany increased by 55 percent, additional increase in 2005 through truck toll

FINANCIAL EFFECTS OF ETR IN GERMANY (IN BILLION EURO)

Energy taxes 2003/2005

Energy taxes

18,7 bn €=

55% in-crease

Electricity (0 → 2,1 cents/kWh)

1998

6,5

5,0

1,8

16,0

22,8~ 34

2005

Road toll for trucks

+ 3,0

Fuel oil (4,1 → 6,2 cents/l)

Diesel (31,7 → 47,2 cents/l)

Petrol (50,1 → 65,6 cents/l)

Natural gas (0,2 → 0,6 cents/kWh)

ETR

~ 53 3,0 Road Toll (0 → 9-14 cents/km)

~ 56

Total green taxes almost 90 Bn (incl. tobacco, land etc.)

1999 +4,3

2000 +2,5

2001 +3,0

2002 +2,5

2003 +4,3


Almost 90 Percent was recycled to citizens in order to reduce labour cost

GERMAN ETR: RECYCLING OF THE RETURNS

89%

2%9%

Decrease in pension costs = 16 Bn relief for employers, employees and pensioners

Pension system

Environment Projects • Renewable Energies• Less CO2 in buildings• Tax break bio-fuels

Our Comment:

• Great idea, in principle

• Less than perfect execution

Economy

Govt.

Social Security

Budget use


Over 130 Billion of taxes and subsidies directly affect the environment

FISCAL INSTRUMENTS WITH ECO-IMPACT IN GERMANY (Bill. Euro 2003)

-4

6

24

-26

10

89

5-15

2-4

5-15

2-4

PositiveSubsidies

Can Deposit

EmissionTrading

Ecotaxes

Est. world total: $ Bn. 1950Negative

Subsidies

Fiscal Instruments S

- Total 132-144- Impact Red-Green 41-53(Absolute Beträge, Vorzeichen ignoriert)

Incl. toll, taxes on land and tobacco etc.


First Results of Ecological Tax Reform

POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR

Fuel consumption (-16%)CO2-emissions (2-2,5%)Pension costs (-16 bn)Costs for industry (-1 bn)Empty truck travelImported fossil fuels (-13%)Overall tax burden (-4 %)

Tax share of NatureCar sharing (+70 %)Public transport (+5 %)Energy saving technologiesEnergy efficiencyGas-powered cars (x10)Bio-fuelled cars (x2)Job creation (≈ 250.000)Renewable energiesLess

More


The base cost (cost before tax) rose much more than ecotaxes

GERMAN PETROL PRICES IN COMPARISON (EURO CENT / LITRE SUPER)

79

111

139 141

Value Added Tax

Cost before tax

Mineral Oil Taxes

+30%

+184%

50

64

Taxes and charges on the federal level are different

40 40


02

7

11

0

9

11

1415

0

34

7

5

31

0-1

1412

13

54

+1515

13

5

3

+18

22

-2

3 4

3 4 43

4

+2

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Ecotaxes can reverse the trend in transport emissionsINCREASE IN GHG-EMISSIONS IN TRANSPORT (IN PERCENT)

Changes to baseyear 1994Reference: UNFCC 2005

Ecological Tax Reform

Oil price

shock 2001


Since 1999, petrol consumption in Germany decreased by 22 percent, diesel by 6 percent

40 40 41 41 41 3938 37

35 33

31

32

33333434343432

313130

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

FUEL CONSUMPTION IN GERMANY IN MILLION LITERS (1995-2005)

Petrol

Diesel

Ecological Tax Reform1999-2005:

- 6%

1999-2005:

- 22 %

Reference: Federal Statistic Office, 2006


The two exceptional cases in the EU: CO2 transport emissions are falling in Germany and the UK

IMPACT OF ECOTAX ON TRANSPORT EMISSIONS IN D AND UK

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

1996 1997 1998 1999 2000 2001 2002

An

nu

al c

ha

ng

e in

CO

2 e

mis

sio

ns

s

Ecotax 1999-2003Fuel Duty Escalator 1993-1999

Other EU

Germany

UK


While the US increased their oil imports by 26 percent, Germany reduced it by 13 percent

TOTAL CHANGE IN OILIMPORTS FROM 1998-2005 IN MILLION BARRELS PER DAY

-0,3822,4852,867Germany

2,58912,3539,764USA

Absolute

Change Change in percent20051998

-13%

26%

Saving energy perhaps less costly than fighting wars for oil...


Most of the oil comes from rather unstable sources

Conflicts, Terrorism, Instabiltiy

DISTRIBUTION OF WORLD OIL RESSOURCES


Despite the increase in energy taxes: Overall tax rate was falling

ANNUAL INCREASE OF ENERGY TAXES AND OVERALL TAX RATIO

Increase in energy taxes +55 %

Decrease in overall tax rate: 4.2 %

Year-on-year change (percent)


Since 1998, the tax share of nature has increasedRELATIVE BURDEN SHARES IN TOTAL LEVIES GERMANY 1970 - 2003

+10-15% burden shift

needed!

Nature

Neutral

Capital

Labour

Nature: Taxes on energy, land, toll etc.

Neutral: VAT, duties etc.

Capital: business and capital taxes etc.

Labour: income tax, social security

Increase ~20 percent


We’ve come to our next topic:








Only 20 years from textbook to lawbookBRIEF HISTORY OF ETR IN GERMANY

1978 First proposal by Hans Christoph Binswanger, Swiss economist1980s Politicians, parties, NGOs like BUND, and others discover the concept

(e.g. Prof. Ernst von Weizsäcker). Radical approaches even advocate total substitution of conventional taxes through ETR (UPI)

1990s Double Dividend Debate. Social Democrats and Greens take ETR into their programmes, but German unity distracts from the debate

1994 FÖS/GBG presents first FÖS-Memorandum after DIW-study financed by Greenpeace. Both claim: Double dividend is possible.

Second round of intensive political debate – in theory, all parties are in pro. But Helmut Kohl wins election and freezes debate. Merkel silent...

1998 Green Party triggers third round of debate with demand for fuel price to 5 DEM/litre. ETR becomes important issue in 1998 campaign

1998 Gerhard Schröder leads Red-Green Coalition to its first victory.

1999 On April 1st, German ETR enters into effect – after two decades.

(Pigou: 1924)


German ETR debate was part of a widespread consensus throughout Europe

Waste

High speed cars

SO2

Chloride

ENERGYor CO2

One-way-bottles

Water

Areas

Fertilizers

Batteries• Concentration on energy/CO2:

not 150 different ecotax candidates!• Careful escalation/ no shocks:

Slow, but steady growth,3-5% p.a.• Concrete blueprints:

(like Green Budget in Germany 1994)• 100% Budget neutrality:

No rise in tax quota – no gain for State• Shifting of tax burden:

From labour to nature• Export protection

for energy intensive branches• European and global dimension

of ecotax debate and reform

1970/80ies: Wild array of Ecotax proposals

Early 1990ies:EU-wide consensus emerges

Packages

Plastic

bags


In the summer of 2000, there were anti-ETR demonstrations throughout Europe

Unlike many other EU governments, the red-green coalition didn‘t

back down under pressure…


One of the most played plays in this debate is from Molière – works fantastically since 1673!

So beware of Phantom Pain!• Very frequent and popular disease

• Particularly with business people

• Car drivers also quite often affected

• Tabloids love to fight for the poor victims!


Bureaucracy? Ecotaxes with lowest admin costs

0,13%

0,5%

1,2%

2,2%

2,9%

5,0%

Ecotaxes

Purchase tax

Trade tax

Income tax

Car tax

Corporate incometax

ADMINISTRATION COST OF DIFFERENT TAXES – PERCENT OF REVENUE

Average 1,6 %

Without exemptions even lower admin cost!

The tax with lowest admin costs gets

the most bashing – are only old taxes

good taxes?!?


German ETR fulfilled its promises for economy and ecology, but was less successful in political terms

EXECUTIVE SUMMARY (0)

WE MUST IMPROVE THE POLITICAL MARKETING!

– – – – –

+ + + ++ + + +

IN TOTAL

Remained a net burden de-spite of good debate start

– – –+Political

It did what it promised, with a little help from oil prices

–+ + + +Environmental

None of the dire predictions came true!

–+ + +Economical

CommentNeg.Pos.Effects


Future ecotax campaigns should not stress dangers, but innovation, benefits and future jobs


More jobs in RENs than in our heavily subsidized problem energies

25000

50.000

20000

10000

64.00044000 38000

6000

Renewable Energy coal nuclear power ligniteSource: BEE 2005

WaterGeothermal powerSolar

Bioenergy

Windpower

REN: 150.000 jobs

JOBS IN THE ENERGY SECTOR IN GERMANY 2005

Problem energies: 107.000 jobs


Air traffic should be a primary target for new measures of the new German Government

• VAT • Ticket tax• Kerosine tax

• Integration with ETS


A lot of people think about ecological policy choices like eating out in a nice restaurant

The bitter truth is:Even if we combine all known instruments, we cannot be sure if we will prevent a Climate Crisis!

Which mix of instruments?

THE “MENU ILLUSION” OF INSTRUMENT CHOICE


Mankind seems to learn only by catastrophes

1990s nuclear exit of some countries

1986 Czernobyl

1970 (!) Non-prolife-ration Treaty

1945 Hiroshima, Nagasaki

1945 United Nations founded

1939-45 World War I

1920 League of Nations

1914-18 World War I

1864 Red Cross founded in Geneva

1859 Battle of Solferino – Book of Henry Dunant

J+D both leave 1933!


Everything must aim to reconcile market and ecological rationality

MINIMISING CONFLICT BY CHANGING FRAMEWORK CONDITIONS

Ecological rationality

Market rationality

Individual consumerlifestyleleisure

Society mediasocietieselections

State regionalnationalsupranational

Laws lawsjurisprudencetaxes/ETR/ETS Ecologically

rational behaviour must pay!


ありがとうございます

ES

CANUSAMerci beaucoup

D a n k e v i e l m a l s !

THANK YO UK INDLY!

Muchas gracias


ANNEX SLIDES




Germany’s point of departure in comparison




Optional: Insights from the instrument debate


This part usu-ally not shown

ETR ETS Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development Seventh Annual Global Conference on Environmental Taxation Ottawa,

Documents

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