D200510 06 GermanETRforJapan

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Travel-Nature

Published on March 30, 2008

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Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development :  Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development Dialogue Japan – Germany October/ November 2005 Dr. Anselm Görres – Chairman Green Budget Germany Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development:  Germany’s Ecotax Reform 1999 - 2003: Implementation, Impact, Future Development Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys 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, scientific 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 -14 foes@foes.de; www.foes.de; www.eco-tax.info About “Green Budget Germany” and the author GreenBudgetNews: An NGO Platform for European and Global Debate:  GreenBudgetNews: An NGO Platform for European and Global Debate Full Name: European Newsletter on Environmental Fiscal Reform. First edition appeared in october 2001 Cooperation Partners: ÖGUT - Austrian Society for Environment and Technology; DEC - Danish Ecological Council; CAAG - Clean Air Action Group, Hungary Topics: Green Budget Reform on EU-level, in individual European countries, and worldwide We are looking for Corresponding Partners who: Write articles case by case Report from their own country on a regular basis Send the newsletter to their own mailing list Or submit addresses to us for distribution PRESENTING GBN Slide5:  Readers of our two newsletters: 7000 in D 3000 abroad ...and how about you?!? ...it’s easy: www.foes.de German edition: ÖkoSteuerNews And here’s how::  And here’s how: www.eco-tax.info www.foes.de foes@foes.de To become a member: To subcribe to our newsletters: To find useful information about Green Budget Reform: After some time we realized that GBG is not only an NGO but also a travel agency:  After some time we realized that GBG is not only an NGO but also a travel agency Sydney Hamilton Barcelona Madrid London Prag Krakau Wien Talinn Munich Hamburg Havanna Vermont Portland Ottawa Cleveland Vancouver Tokyo SELECTED WORLDWIDE ECOTAX PRESENTATIONS BY GBG-MEMBERS .. thanks also to MoEJ Koike-san, for your new ETR proposal JIT for my trip! ..and thanks to MoEG Trittin, who paid for my trip Though I have never been in Japan, my books already are here...:  Though I have never been in Japan, my books already are here... Germany and Japan have much in common, past and present, why not a strong fight for Kyoto?:  Germany and Japan have much in common, past and present, why not a strong fight for Kyoto? Nichts ist un-möglich! Let’s make our taxes as smart and efficient as our car factories! Everybody fights muda in AUDI and TOYOTA factories – but who fights the muda in the world? Prime Minister Junichiro Koizumi is supporting the concept of Mottainai:  Prime Minister Junichiro Koizumi is supporting the concept of Mottainai “Recently, Madame Wangari Maathai, who received the Nobel Prize, upon her visit to Japan was most impres-sed by the Japanese word mottainai – that is, do not waste valuable things. The word mottainai really embo-dies the 3Rs-reduce, reuse and recycle resources, do not waste them. This is what Madame Maathai said. In English, French, Germany or other languages I believe it is difficult to translate this word mottainai, but perhaps we could simply use the Japanese word mottainai. After all, tsunami is a Japanese word. I believe this Japanese word mottainai really embodies all the 3Rs, and therefo-re, I introduced this word which means to attach impor-tance on environmental protection and value resources.” Press Conference following G8 Summit July 8, 2005 Maybe I join GBG? We’ve come to our next topic::  We’ve come to our next topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION The only way to stop and reverse current trends is by changing our behaviour and our structures:  The only way to stop and reverse current trends is by changing our behaviour and our structures WORLDWIDE CO2-EMISSIONS IN MILLION TONS It‘s our decision! Worldwide energy crisis – still BAU?!? „Business as usual“ (BAU) Does anyone believe this will go on forever?!? „Radical change“ Climate change costs money:  Climate change costs money INCREASE OF DAMAGES FROM NATURAL DISASTERS SINCE 1950IES Reference: Munich Re Increase > factor 10 Katrina costs: up to 200 Bn $! Whether iceberg (Greenhouse Effect) or Greenland (resource exhaustion): We must change course!:  Whether iceberg (Greenhouse Effect) or Greenland (resource exhaustion): We must change course! DIFFERENT IMPEDIMENTS BLOCKING PROGRESS ??? Icebergs?Never heard about! Congratulations! We’ve finally come back to the oil prices of 1870!:  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! Look familiar? As much as we look: There‘s less and less oil in the tub:  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! It’s not always easy being green and some people lose faith...:  It’s not always easy being green and some people lose faith... ...but there‘s no reason to get cynical or pessimistic! Our only problem is to step from the old, fossil bathtub into the nice new bathtub of solar energy...:  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 With ETR, ETS, and solar subsidies we’ll make the transit faster and smoother! TRANSITION FOSSIL TO SOLAR (1) Don’t scare people with higher prices forever – tell them about the sunlight at the end of the tunnel!:  Don’t scare people with higher prices forever – tell them about the sunlight at the end of the tunnel! Bad energy before ecotax Bad energy plus ecotax Alternative energy Switching corridor Switching price - upper limit - lower limit Sustainable price level Bad news for finance mini-sters: ecotax rates may still grow, but revenue declines! TRANSITION FOSSIL TO SOLAR (2) We’ve come to our next topic::  We’ve come to our next topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION Within the EU, the UK and D set a shining example:  Within the EU, the UK and D set a shining example AGREED AND REAL REDUCTIONS OF GREENHOUSE GASES (BASIS 1990) Luxemburg Germany Spain Belgium Netherlands Austria Ireland France Greece Danmark Italy United Kingdom EU-Total Sweden Portugal Source: EU-Commission Real Development 1990- 2000 Target Average 2008 - 2012 But in per capita volumes and in the long run, both countries are close to EU average:  But in per capita volumes and in the long run, both countries are close to EU average CO2-EMISSIONS PER CAPITA IN 2000 (TONS) Source: EU-Commission EU-Average: 11 Putting things in perspective: Ecotaxes still small:  Putting things in perspective: Ecotaxes still small GERMAN ECOTAXES IN COMPARISON TO JAPAN (in Bn. Euro) Japan 2003 Population: 125 million GDP: 3798 billion Euro Taxes 16% Social Security 11% of GDP Ecotaxes: 1,7% of GDP Germany 2003 Population: 82 million GDP: 2215 billion Euro Taxes 21% of GDP Social Security 18% of GDP Ecotaxes: over 10% of all taxes and contributions* About 4% of GDP* * Including road toll of 2005 and non-energy taxes like land tax, tobacco tax etc. 3.798 1025 27% 65 < 1,7% GDP Taxes + Ecotaxes Social Sec. 100% 100% 39% = 4% 2215 864 89* (Percentage values = Share of GDP) German ecotax share more than double! Japan seems to have a hard time to fulfil the obligations that were agreed upon in Kyoto:  Japan seems to have a hard time to fulfil the obligations that were agreed upon in Kyoto Since 1990, Japan should have saved 6% CO2 – but it raised emissions by 7,4%. So now the gap is 13,4% - app. 100 Mt! TARGET AND REAL CARBON REDUCTIONS (BASIS 1990) Source: Japan Times October 26, 2005 (Facilitated through German Unity) By the way, isn’t Kyoto a city in Japan? We’ve come to our next topic::  We’ve come to our next topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION The MoEJ-proposal is courageous, though less ambitious than Germany’s ETR:  The MoEJ-proposal is courageous, though less ambitious than Germany’s ETR 43 mn tons (3,5% of J) 50% for forests 50% for REN and energy savings € 5 bn (370 bn Y) 19 Euro across the board All only 1 time + Coal - Transport fuels Japan estimate a little too optimistic? 20-24 mn tons (2,4-2,9% of D) CO2-re-duction Forest maintenance = less CO2? 90% to reduce labour cost Revenue use D = .85% of GDP J = .15% of GDP € 19 bn Total volume Traffic problems > CO2! ETS-price EU = 24 € 2 €/litre for heavy oil, 66 €/l for petrol Rate per ton of CO2 Most 5 times Rise Both provide for large exemptions Almost all energies Tax base COMPARING JAPANESE CONCEPT FOR 2007 WITH GERMAN ETR 1999-2003 Source: MoEJ/GBG-Analysis Germany’s Social-Ecological Tax Refom: What did we do?:  Germany’s Social-Ecological Tax Refom: What did we do? Steady tax increases 1999-2003: Diesel/Petrol: +3,07 Ct/litre p.a. 1999-2003 Electricity: +1.02 Ct/kWh in 1999 +0.26 Ct/kWh p.a. 2000-2003 Single tax increases (only once or twice): Natural gas: +0.16 Ct/kWh in 1999 +0.20 Ct/kWh in 2003 Light heating fuel: +2,05 Ct/litre in 1999 Special provisions with reduced rates for industry, railways, public transport, energy intensive firms Revenues in 2004: 18.7 bn € (= 2% of total contributions); mainly used to reduce social security payments OVERVIEW GERMAN ETR Energy taxes in Germany increased by 55 percent, additional increase in 2005 through truck toll:  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.) Most energy taxes were increased by high percentages:  Most energy taxes were increased by high percentages TAX RATES ON ENERGY 1998 – 2004 (EURO CENT PER UNIT ENERGY) 31% increase 49% increase 51% increase 200% increase Almost 90 Percent was recycled to citizens in order to reduce labour cost:  Almost 90 Percent was recycled to citizens in order to reduce labour cost GERMAN ETR: RECYCLING OF THE RETURNS Decrease in pension costs: Calculative: 1,7 % (ca. 480 € relief in average per employee) In fact: only 0,8 % (because of contrary effects) Pension system Budget use (mainly in last year) Environment Projects Renewable Energies CO2-reduction for buildings Our Comment: Great idea, at least in principle Less than perfect execution = 17 Bn relief for employers, employees and pensioners Economy Govt. Soc. Sec. Over 120 Billion of taxes and subsidies directly affect the environment:  Over 120 Billion of taxes and subsidies directly affect the environment FISCAL INSTRUMENTS WITH ECO-IMPACT IN GERMANY (Bill. Euro 2003) Includes 4-5 bn. paid by utilities Conclusions Taxes have 15 x more weight than green subsidies Red-Green Coalition had biggest impact through ecotax Harmful subsidies are 4-5 x bigger than green ones Cutting bad subsidies perhaps most important venue Estimated world total: $ Bn. 1500 Includes non-energy Comments Negative value = environmentally, not fiscally! Many indirectly harmful subsidies here not considered Green taxes include road toll with 2005 volume Green subsidies include Third-party-subsidies (mainly EEG) In Germany, the pressure on ecologically counterproductive subsidies is mounting:  In Germany, the pressure on ecologically counterproductive subsidies is mounting GREEN TAXES (2004): 89 POSITIVE SUBSIDIES (2004): 6 NEGATIVE SUBSIDIES (2004): 26 LEVIES AND SUBSIDIES WITH ENVIRONMENTAL IMPACT IN GERMANY (Bill. Euro) Increasing pressures: Fiscal deficit rising (Maastricht!) Growing critique of overcomplexity Growing demands for tax reform Fiscal needs of the future TB: Tax Break SU: Subsidy TPS: Third Party Subsidy Tobacco, land, alcohol... Slide34:  First Results of Ecological Tax Reform POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR Fuel consumption (>10%) CO2-emissions (2-2,5%) Overall tax burden Pension costs (5,6 bn) Costs for industry (1 bn) Empty truck travel Imported fossil fuels (14%) Car sharing Energy saving technologies Energy efficiency Gas-powered cars (x10) Bio-fuelled cars (x2) Job creation (≈ 250.000) Renewable energies Tax shift towards nature Less More The base cost (cost before tax) rose much more than ecotaxes:  The base cost (cost before tax) rose much more than ecotaxes GERMAN PETROL PRICES IN COMPARISON (EURO CENT / LITRE SUPER) 79 111 115 122 Value Added Tax Cost before tax Mineral Oil Taxes +42% +80% 104 45 Does Tanigaki-San know that like GB, Japan is an island? Within Asia, Japan has the highest fuel prices (excluding Turkey and Hongkong):  Within Asia, Japan has the highest fuel prices (excluding Turkey and Hongkong) Source: International Fuel Prices 2005 Dr Gerhard P. Metschies gerhard.metschies@gmx.de The two exceptional cases in the EU: CO2 transport emissions are falling in Germany and the UK:  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 Other EU Germany UK Since 1998, the tax share of nature has increased:  Since 1998, the tax share of nature has increased RELATIVE 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 While the US increased their oil imports by 21 percent, Germany reduced it by 14 percent:  While the US increased their oil imports by 21 percent, Germany reduced it by 14 percent TOTAL CHANGE IN OILIMPORTS FROM 1998-2004 IN MILLION BARRELS PER DAY -0,408 2,459 2,867 Deutschland 2,088 11,851 9,764 USA Absolute Change Change in percent 2004 1998 Saving energy perhaps less costly than fighting wars for oil... We’ve come to our next topic::  We’ve come to our next topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION Only 20 years from textbook to lawbook:  Only 20 years from textbook to lawbook BRIEF HISTORY OF ETR IN GERMANY 1978 First proposal by Hans Christoph Binswanger, Swiss economist 1980s 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 ecotax met with similar attitudes as in other countries...:  German ecotax met with similar attitudes as in other countries... “Mas vale un diablo conocido que un angel por conocer” (Spanish Proverb – better a known devil than an unknown angel) “Dear God, make me chaste, but not right away” (Saint Augustine as a young man) Until Galileo, people believed the earth to be a disk:  Until Galileo, people believed the earth to be a disk For today's "Ecological Ptolemaians", the economy still constitutes the center of the world…:  For today's "Ecological Ptolemaians", the economy still constitutes the center of the world… COMPETING VIEWS OF THE WORLD View of "Ecological Ptolemaians" In Truth: Economy only Subsystem Brecht's Galilei: "Do we have to assume, that what is large revolves around what is small, or is it not rather the other way round?" One of the most played plays in this debate is from Molière – works fantastically since 1673!:  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 drives also quite often affected Tabloids love to fight for the poor victims! German ETR debate was part of a widespread consensus throughout Europe:  German ETR debate was part of a widespread consensus throughout Europe Waste High speed cars SO2 Chloride ENERGY or 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 :  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… ETR proofed that most former cons were wrong:  ETR proofed that most former cons were wrong COUNTERARGUMENTS Reinforced by oil price increase, demand elasticity became obvious No elasticity! Germany was in excellent company (Benelux, Scandinavia) Never wait for a supra-national ETR if you really want it! Burden offset by general tax reform Pension financing relieves employers, employees and retirees Hits poor har-der than rich ETR contributes nearly 20 bn. Euro to budget Energy more stable than other tax bases – no Laffer effect! Self-defeat Tax quota 2004 much lower than 1998 ETR can reduce government spending, i.e. less eco-subsidies Net relief of € 1 bn yearly for German industry. Today, we are still world export leader Isolation Higher taxes Competi-tiveness Earmarking of green taxes works well for symbolical amounts, not for large steering volumes:  Earmarking of green taxes works well for symbolical amounts, not for large steering volumes Beer tax for beer drinkers? Property tax for property owners? Car tax only for roads? Green taxes only for green projects? Some points against earmarking: Higher burden for citizens Inflation from higher spending No recycling possible Strong green taxes reduce need for eco-subsidies Threat to budget sovereignty Receipts and needs ≠ 1:1, thus inefficient allocation P.S.: German ETR 5x > Japan’s Bureaucracy? Ecotaxes with lowest admin costs:  Bureaucracy? Ecotaxes with lowest admin costs 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?!? Despite overall positive effects, German ETR leaves room for improvement...:  Despite overall positive effects, German ETR leaves room for improvement... POSITIVE AND NEGATIVE EXPERIENCES FROM GERMAN ECOTAXES Bureaucracy, loopholes and exceptions - more than necessary Coal totally excluded, heating oil and natural gas only in first step Budget neutrality not accepted by public that wants eco-taxes devoted to eco-purposes Winners (mainly industry) do not recognize relief and continue complaining Only small cuts in huge anti-ecological subsidies Actual law much simpler than former models (litre, not joule) Budget neutrality nearly realised Part of more general reform, net tax relief for most tax payers Therefore mainly winners, very few losers First positive results for environment and labour market Only small concessions to gas-price-riots in 2000 Reversal in factor burden! German ETR fulfilled its promises for economy and ecology, but was less successful in political terms:  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 Comment Neg. Pos. Effects In economic terms, ETR has generated clear benefits for pension system and labour market:  In economic terms, ETR has generated clear benefits for pension system and labour market EXECUTIVE SUMMARY (1) Generous exemptions lead to fis-cal losses from these branches Revenue loss in border regions from drivers filling up in neighbour states Phantom pain of perceived burden may have had negative influence on some investors/ managers (e.g. Opel-Boss Forster lost a bet because he actually believed in net cost burden for Opel) Actual pension reduction much lower than in theory (loss of credibility!) Relative simple legislation, only one new tax (electricity); moderate steps over five years; no shock effects Complications only due to exemptions (industry, public transport, energy-intensive, bio-fuels, cogeneration) Almost € 20 bn. fiscal returns 90 Percent used for reduction of labour costs (pension insurance) 200.000 to 250.000 new jobs created Industry relieved by app. € 1 bn., many companies net winners; many technological innovations Part of general tax reduction reform, therefore reduced national tax and contributions quota Social burden for people not profiting from lower pension rates offset through lower taxes (in most cases) Correction of decades-long abuse of pension system for social aims/ German unity etc. Negative Effects Positive Effects For the environment, there were almost exclusively positive effects:  For the environment, there were almost exclusively positive effects EXECUTIVE SUMMARY (2) Nuclear energy and coal not included Electric power tax partly offset by price cuts from deregulation In some areas, inelastic custo-mer reactions to higher prices Lack of institutional reforms to facilitate customer reaction, i.e. in rented apartments Exemptions gave little or no efficiency incentives for energy-intensive industries Energy becomes gradually more expensive (until oil price shocks accelerate price increase) ETR provides steady incentives for behavior change and innovations by entrepreneurs and individuals (instead of detailed prescriptions what to do) From 2000-2004, transport fuel sales fall by >2% p.a. (first time in after-war history!) CO2-emissions: 2.4% less until 2003, 3% until 2010 Use of ETR to subsidize better building insulation etc. Energy efficiency becomes purchasing criterion Each year, 0,5-1,5% more public transport passengers 10% growth of gas-powered cars Double-digit growth of solar thermal installations Important factor to fulfil Germany’s Kyoto obligations Negative Effects Positive Effects In the political balance sheet, the negative effects dominate:  In the political balance sheet, the negative effects dominate EXECUTIVE SUMMARY (3) For most of the year 1998-2005, ETR was a political burden for the Red-Green Coalition Indirect recycling via pension system is complicated and difficult to sell, often criticized Use of revenues for non-environmental purposes is neither really understood nor appreciated Inconsistent public demands: calls for budget neutrality as well as spending for green projects Pro-business parties attack generous exemptions for business (after fighting for them!) Ecotaxes are perceived as socially unjust (for families, students, pensioners) Permanent attacks from yellow press and car lobby (ADAC) No recognition and support from winners, but hard attacks from real and perceived losers Negative Effects German Energy Policy gains high recognition within EU and overseas In 2000, Schröder cabinet holds firm against populist protest, making only symbolic changes Majority of serious press and academic community in favor Towards end of 2005 campaign, Katrina turns energy policy into an asset with many voters CDU, CSU, and FDP still fight ETR – but promise to sustain it ETR-debate converts even mar-xist greens to market advocates! Positive Effects In sum: ETR is a phantastic product, but needs smart selling against populist and tabloid pressures :  In sum: ETR is a phantastic product, but needs smart selling against populist and tabloid pressures EXECUTIVE SUMMARY (4) Argue chances and innovation, not threats and doom Show simplicity of stepping from fossil into solar bathtub Win politicians with fiscal and practical advantages First tax in history actively asked for by citizens Efficient and unbureaucratic, lowest admin cost of all taxes More efficient than most other eco-instruments Win economists with beauty of prices saying the truth Win labour and people with jobs, jobs, jobs (double dividend) Revenue: Combine recycling, debt reduction and green projects Make reform package to combine ETR with social relieves Put small and mostly phantom cost of today in relation to saving the future of our kids and our beautiful planet Forge rainbow coalition of enlightened conservatives, innovative business people and progressive parties Involve competent and enthusiast NGOs like GBG Future ecotax campaigns should not stress dangers, but innovation, benefits and future jobs:  Future ecotax campaigns should not stress dangers, but innovation, benefits and future jobs More jobs in RENs than in our heavily subsidized problem energies:  More jobs in RENs than in our heavily subsidized problem energies Source: BEE 2005 Water Geothermal power Solar Bioenergy Windpower REN: 150.000 jobs JOBS IN THE ENERGY SECTOR IN GERMANY 2005 Problem energies: 107.000 jobs Even our MoE officials in Berlin came up with very funny promotion ideas:  Even our MoE officials in Berlin came up with very funny promotion ideas Movie about enery-conscious driving www.bmu.de/files/allgemein/video/mpeg/bmu_spot_engl.mpg By turning off the light earlier, you get.. Bad eyes For the new grand coalition, climate policy remains an important priority:  For the new grand coalition, climate policy remains an important priority POLITICAL IMPLICATIONS OF BUNDESTAG ELECTIONS 2005 Our recommendations Concentrate on new venues tax air traffic (jet fuel, tickets, VAT) expand toll (trucks → cars?) reform vehicle tax Reduce harmful subsidies No all-out continuation of old ETR, but use opportunities to cut diesel subsidy reduce ETR-exemptions optimize interface with ET Build on fiscal needs of State Fight for support and higher rates in EU Situation after election Neo-liberal, anti-ETR coa-lition (black-yellow) lost Pro-ETR majority (red-red-green) only virtual Grand coalition has “work and growth” as top goals No member has very strong eco-profile/ -wing But: Priority for climate policy already confirmed! New MoE social democrat Air traffic must be a primary target for new measures:  Air traffic must be a primary target for new measures VAT Ticket tax Kerosine tax Integration with ET What would we recommend to Koike-San if asked?:  What would we recommend to Koike-San if asked? Congratulations to your proposal – it’s courageous and progressive. But: Since Japan is an island, why not include the transport sector? With Japan’s high national debt and low tax quota, - why not 1/3 for debt reduction - 1/3 for recycling/ social security - and only 1/3 for green projects? 3 And use all your charm and intelligence to win over the tough guys from METI! Great idea! We’ve come to our last topic::  We’ve come to our last topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION For a high quality combination of eco-instruments, we need awareness, courage and wisdom:  For a high quality combination of eco-instruments, we need awareness, courage and wisdom Ecological Awareness Political Courage Economic Wisdom High High Quality of Eco- Policy Low Low High High Low Low CONDITIONS FOR GOOD INSTRUMENT CHOICE ? Sustainability is a central part of „The European Dream” :  Sustainability is a central part of „The European Dream” Global Justice Peace/ Cooperation Global Governance Climate Protection Ressources Amenity, Diversity Basic Needs Just Distribution No Discrimination Free Market Jobs and Growth Global Trade Democracy Freedom Constitutional State Global Develop-ment and Peace Defense of Nature Social Justice Economic Welfare Political Liberty Five Dimensions of Sustainability + ++ +/– – ++/– + +++ ++++ +++ ++++ +++ Both nationally and globally, we must progress from Pollution Control to Resource Productivity:  Both nationally and globally, we must progress from Pollution Control to Resource Productivity TWO DISTINCT PHASES OF ECOLOGICAL POLICY 1975 - 2000 Pollution Control 2000 - 2100? Resource Productivity Problem Substances Toxics, Waste, SOx, Fluorides… CO2, Energy, land use, other primary resources… Regional Focus/ Process Stage Mainly local / Mainly outputs/emissions Mainly global /mainly inputs/resources Predominating philosophy End of pipe/ Command and control As upstream as possible – mostly market incentives Affected economic activities About 5 Percent About 95 percent Most efficient tools Policy mix – anything goes (Coase Theorem) Not possible without market forces and allocative power of tax system Difficulty of task Prevent harmful activities – clean up our mess Change entire way of life – develop new prosperity model Source: Ernst von Weizsäcker Wanted Internationally: Global Governance and Global Sustainability!:  Wanted Internationally: Global Governance and Global Sustainability! World situation defines multiple tasks: Just and sustainable World Order Globally shared responsibility for peace and security Worldwide protection of climate and resources In other words: New rules and new tools Mankind seems to learn only by catastrophes:  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! Katrina destroyed the dykes of New Orleans...:  Katrina destroyed the dykes of New Orleans... .. how many more Katrinas do we need, until the walls of ignorance and indifference are overcome? So let’s not behave like the famous three monkeys of the Toshogu Shrine!:  So let’s not behave like the famous three monkeys of the Toshogu Shrine! ありがとうございます We’ve come to our next topic::  We’ve come to our next topic: Executive Summary/ Introducing Green Budget The challenge ahead – from bathtub to bathtub Germany’s point of departure in comparison Red-Green Ecotax Reform: facts and figures Some lessons from the German ETR debate Some remarks about the instrument debate A global perspective – epilogue with monkeys CONTENT OF THIS PRESENTATION This part was usually not shown Like motherhood, everybody seems to love an “intelligent instrument mix”:  Third party subsidies – saves money for the gov’t ... Road toll and vignettes – not new for some countries ... reduction of harmful sub-sidies – very often forgotten Green taxes – hated by the conservatives Green Subsidies – most loved by populists Emission trading – the new and rising star Like motherhood, everybody seems to love an “intelligent instrument mix” Moral Suasion – like when we were kids Command and Control – Oldies are goldies Judicial/legal developments – perhaps underestimated Industry agreements – Montesquieu at pain FISCAL IMPACT MULTITUDE OF INSTRUMENTS In all countries, you meet with the same errors in the instrument debate:  In all countries, you meet with the same errors in the instrument debate Dramatic problem underestimation: Scope of environmental problem and action deficit is ignored Coase’s Curse (or McDonald’s menu illusion): Some people still believe in the freedom of choice! Tinbergen versus “Singapore Lesson”: We usually need several instruments, even for one and the same problem Oversight of visible and invisible harmful subsidies: In most countries, billions of Euros or Dollars subsidize traffic, energy consumption etc. (e.g., German cities subsidize parking areas of shop owners) Underestimated fiscal and social costs of green subsidies: Some people still believe in free lunches (for good causes) ERRORS ABOUT INSTRUMENT CHOICE A lot of people think about ecological policy choices like eating out in a nice restaurant:  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 I always believed in Tinbergen until I met a charming lady from Singapore...:  I always believed in Tinbergen until I met a charming lady from Singapore... Nobel Laureate Jan Tinbergen: „you need at least as many instruments as targets“ Lady from Singapore: „use as many instruments as you can possibly think of to fight traffic“ Everything must aim to reconcile market and ecological rationality:  Everything must aim to reconcile market and ecological rationality MINIMISING CONFLICT BY CHANGING FRAMEWORK CONDITIONS Ecological rationality Market rationality Shift to ecological taxes + less complex legislation = relief for economy:  Shift to ecological taxes + less complex legislation = relief for economy THE TOTAL COST OF TAXES + LEGISLATION COMPARED The same or a lower tax burden, but... ...more revenue from ETR and ETS ...less complicated legislation Today Future ...fewer conventional taxes and therefore, redu-ced overall burden! Green taxes favour budget cuts by using both sides of the budget for regulatory purposes:  Green taxes favour budget cuts by using both sides of the budget for regulatory purposes THE BUDGET REDUCTION POTENTIAL OF ECOLOGICAL TAXATION Reduced Expenditure Old level New level Avoided spending from better tax system Reduced Tax Receipts - Old level New level Less "red" taxes More "green" taxes Government savings: Less money needed to counterfeit negative effects of "red" taxes Less expenditures needed to achieve ecological objectives + ETR and ETS combine the best of two worlds, for both have fiscal and ecological effects:  ETR and ETS combine the best of two worlds, for both have fiscal and ecological effects ECOTAXES AS INSTRUMENTS OF BOTH FISCAL AND ECOLOGICAL POLICY Eco-Instruments Fiscal Instruments Conventional Eco-Instruments Conventional taxes Emission trading Ecotaxes Modern ecological policy: Integrates all elements Overcomes “Coase’s Curse” In the starting phase, we should use ETR and ETS according to their respective advantages:  In the starting phase, we should use ETR and ETS according to their respective advantages Small groups Competition intensive Large groups Only local competition Overlap is no problem! Advantage ecotaxes Advantage emission trading Over time, the optimal instrument mix should shift from ETR to ETS and from Grant to Auction:  Over time, the optimal instrument mix should shift from ETR to ETS and from Grant to Auction ←66 % Ecotaxes ETS Auction ETS Grant 100 % 0 % Contribution of instruments to CO2-Control Grandfather option in the long run not socially sustainable The bigger the problem and the number of people, the more we must resort to really powerful tools:  The bigger the problem and the number of people, the more we must resort to really powerful tools Moral Suasion Green Subsidies Command & Control Emission trading Green taxes Small Medium Big Scope of Problem/ Number of People Often only excuse Too expensive! Always useful Only for smaller groups Highly efficient Political Priority TOOLS EVALUTION AS A FUNCTION OF PROBLEM PERCEPTION

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