It’s only a small part of the traffic light’s savings mosaic, but it has symbolic significance: The federal government is reportedly planning to eliminate subsidies in national air transport. The result would be more expensive prices. This may be annoying, but more expensive tickets would mainly affect business travelers. Around two thirds of domestic flights are business trips and are therefore paid for by companies. And if flights become more expensive, the incentive to switch to more climate-friendly means of transport increases. From a purely climate policy perspective, this step would make sense.
One of the oddities of the traffic light compromise is that it doesn’t yet seem entirely clear how exactly the subsidies will be eliminated. The Ministry of Economic Affairs says the government wants to introduce a kerosene tax. So far, national air traffic has been exempt from this. Greenpeace is already cheering. There is a “small ray of hope” in the resolutions “that kerosene for air traffic, which is particularly harmful to the climate, will no longer remain tax-free,” says Lena Donat, mobility expert at Greenpeace. In view of the rapidly increasing CO2 emissions in aviation, this step is overdue.
But is that actually true? So far, no one in the Ministry of Finance has mentioned the word kerosene tax. Apparently people there are thinking about eliminating the reduction mechanism for the aviation tax, a kind of tax compensation if the revenue from emissions trading for aviation increases. And so we will probably have to wait a little longer to find out exactly what the path in this field will look like. But the tickets are likely to be more expensive either way.
At first it sounds like a shocker: The 12.5 billion euros that were earmarked for the restructuring of Deutsche Bahn in the climate and transformation fund will be cut. And this despite the fact that the general renovation of the network is scheduled to begin next year: 4,000 kilometers of rail are to be modernized by 2030, according to the plan by Transport Minister Volker Wissing (FDP).
In order to save the plans, a new construction should help. And that could definitely make sense to finally start putting the railway’s financing on a permanent new footing. The core idea is to sell federal investments, for example shares in the post office and Telekom, in order to save the money for the railway. The railway’s profitable logistics subsidiary, Schenker, is also expected to be sold; an investor is reportedly already interested in taking it over. The billions generated from the sales should then go to the railway so that the urgently needed investments can still flow.
The idea could be a path towards a major reform that the federal government wants to initiate anyway: new financing for the rail network. To date, the rail network has been financed from almost 200 different sources. Too complicated, too volatile, too susceptible to false incentives – that was the verdict of the “Rail Acceleration Commission” last year. Two funds based on the Swiss model are needed to ensure the preservation, expansion and construction of routes – regardless of who is in power. Expansion and renovation, that much is clear, are urgently needed. The disastrous unpunctuality of the train must come to an end. More than a fifth of long-distance trains are delayed.
The fact that the environmental bonus for electric cars is expiring at the end of December sounds painful at first. Experts and lobbyists are reflexively warning of an end to the ecological transport transition. The idea of strongly promoting electric cars has long since failed. The numbers prove that. The federal government wanted to use the environmental bonus to put 15 million electric cars on the road by 2030. This obviously cannot be achieved with billions in subsidies alone. Six years before the target date, just over 1.3 million electric cars have been registered. A disgraceful record.
The financial injection primarily benefits manufacturers. They were able to build ever larger electric cars that gave them high returns and sell them to companies and wealthy private customers at list prices; the state granted the discount. At the same time, manufacturers eagerly drove up prices. In 2023, an electric car cost an average of 52,700 euros, according to the Center of Automotive Management (CAM) in Bergisch Gladbach – 4,000 euros more than in 2022. In this respect, it is right to reduce the premium.
If you look at countries where the purchase rate of electric cars (including hybrids) is already very high, the incentives are different anyway. Norway (rate close to 80 percent) made combustion engines much more expensive through tax increases. In the Netherlands (over 50 percent) there are plenty of charging stations even in the last village. Sweden (58 percent) no longer subsidizes electric cars, but prefers to build parking garages in which every parking space has a charging point. In Austria you can drive faster with electric cars than with combustion engines.
But not only politicians, car manufacturers also have to move. You have to build cheap electric cars that even average earners can afford. The German brands are still having a hard time, but the pressure is growing, especially from Chinese competition.
Most citizens are probably not aware of this: Since 2021, all EU member states have been paying a tax on plastic – 80 cents per kilogram of non-recycled packaging waste. For Germany, the total for 2021 and 2022 was 1.4 billion euros each. Where exactly the countries get the money from is up to them. Some member states have obliged companies that put plastic into circulation to do so. Others pay from taxes. That was also Germany’s previous path. But that should now be over. The federal government wants to have companies pay the levy in the future, emphasized the Chancellor’s spokesman.
The plastics industry is horrified and warns of an additional burden on the economy and consumers. It is incomprehensible to the industry that, in addition to the special disposable plastic levy that will be introduced from 2024, a further levy is now to be paid on plastic packaging. This outcry was to be expected. It is probably pious wishful thinking on the part of the Ministry of Economic Affairs to assume that companies will not pass the costs on to consumers.
But even if they end up paying more, the path seems right. The incentive to reduce plastic waste is increasing. By the way: The measure doesn’t really come as a surprise. The SPD, Greens and FDP had already announced this in the coalition agreement.
It is also good news that in 2024 the prices for CO2 on fossil energy will also rise for private individuals – which the grand coalition had already decided. This means nothing other than that those who cause greenhouse gases will be asked to pay more. 45 euros will then be due per ton of CO2 instead of 40 euros as previously planned. Consumers will feel the five euros: at the gas station, where gasoline and diesel could be more than four cents more expensive. But also when it comes to gas and oil bills, where, according to the Mercator Research Institute MCC, a kilowatt hour of gas is 0.4 cents more expensive and a liter of heating oil is 4.7 cents more expensive.
While the Greens in particular preferred to push forward the energy transition through subsidies in the past, economists have long been calling for the polluter pays principle to be used more as a steering instrument: those who do more damage to the climate should pay more, that is the idea. This rule has been in effect for a long time for companies and energy providers; they have to buy emissions certificates across the EU in order to be able to emit greenhouse gases. Consumers will experience a similar situation in the future – billing will be based on the product price.
Many economic experts believe that carbon pricing is the better way to achieve climate goals. In the long run it is fairer, more efficient and, above all, cheaper for the individual. Ottmar Edenhofer, director and chief economist at the Potsdam Institute for Climate Impact Research, also calls for the engine of the energy transition to be converted accordingly – simply because it steers private investments in a sustainable direction and makes heat pumps or electric cars economically desirable.
Incidentally, Edenhofer is demanding even more courage from the government: He believes a CO2 price of 120 euros by 2030 would be effective.
