After the members of Germany's climate cabinet worked and negotiated for 19 hours on a new climate-change package that would help the country reach its 2030 target, the new decision was made public on Sept. 20. However, it was met with harsh criticism. While environmentalists claim the action plan is insufficient, the public and several industries do not approve of it due to high costs, leaving no one satisfied.
The 54 billion euro ($60 billion) package sets forth paying 10 euros per ton of carbon dioxide released from petrol, diesel and natural gases as of 2021, which will be gradually increased to 35 euros. This amount will be paid by companies and industries, not consumers, yet in this case it is expected that it will be reflected also on the consumer price for fuel.
On the other side, environmentalists underline that the 10 euro price level is too low and far from discouraging big companies to pollute the environment. Also, many say that a carbon tax will disadvantage poorer citizens, who will struggle to afford rising fuel and heating costs.
Amid the climate protests in 500 German towns and cities, the announcement of new measures was not met with pleasure. Even though some claim that this package is not appropriate for Europe’s biggest economy, it needs to be considered that the export-based German economy is on the doorstep of a recession.
“I am bitterly disappointed,” Annalena Baerbock, co-leader of the Green party, said of the measures after the package was announced and protests started. “The government has failed in the humanitarian task of climate protection," she said.
Germany's economy contracted 0.1% in the second quarter and weak data since it has fueled concerns that Europe's biggest economy could shrink again between July and September and tip the country into recession for the first time since 2013.
On October 16th, the cabinet agreed on lowering the value-added tax (VAT) for long-distance train tickets from 19% to 7%, aiming to encourage people to leave their cars and use the train more often. The coalition also plans on increasing taxes for plane tickets and incentives for residents who plan on modernizing their heating systems with climate-friendlier models. Thereby, Germany hopes to reach its climate targets for 2030.
Furthermore, the Bundesrat, the legislative body, approved a resolution banning internal combustion engines by 2030, which was again welcomed with mixed reactions as Germany has a high rate of car ownership. Yet, this initiative could encourage major German car manufacturers such as BMW, Audi, Mercedes and Volkswagen to strengthen commitments to developing electric cars.
The government had put forth that under the current situation, Germany would fail to reach its 2030 target to reduce emission by 40% in contrast to 1990 levels. Annegret Kramp-Karrenbauer, the leader of Germany's governing Christian Democrats (CDU) party, said a few months ago that the ultimate goal was to be carbon neutral by 2050 and she said the new package was ambitious.
However, tax increases could have a negative impact on international competition between companies that heavily rely upon it, such as aviation companies. Finance Minister Olaf Scholz told Reuters yesterday in Berlin that "when countries become active in the fight against climate change and try to make carbon dioxide emissions more expensive, the question of what this will mean for international competition emerges."