Inefficient Fossil Fuel Subsidies in Germany? Phasing Out Inefficient Fossil Fuel Subsidies Ways Forward for the G20 BSEC, 10 October 2016

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1 Inefficient Fossil Fuel Subsidies in Germany? Phasing Out Inefficient Fossil Fuel Subsidies Ways Forward for the G20 BSEC, 10 October 2016 Swantje Fiedler Director Energy Policy FÖS Green Budget Germany

2 Green Budget Germany Forum Ökologisch-Soziale Marktwirtschaft (FÖS) Non-profit organisation / political think tank Founded in 1994 Our vision: An ecological and social market economy, in which "prices tell not only the economic, but also the ecological truth" (Ernst Ulrich von Weizsäcker) Fields of Expertise Ecological tax reform / taxes and levies on energy and resources Phase-out of environmentally harmful subsidies 2

3 Green Budget Germany Forum Ökologisch-Soziale Marktwirtschaft (FÖS) Activities Development and promotion of concepts for market-based environmental policy on national/ international level Research / Studies Expertise Lectures Conferences Lobbying 3

4 Outline 1. Political notifications in Germany 2. Environmentally harmful subsidies in Germany 3. Fossil fuel subsidies: examples 4. Conclusion for G20 4

5 Political notifications in Germany Coalition agreement CDU/CSU/SPD in 2013 We will subject all subsidies new and old to continuous examination in accordance with the guidelines of subsidy policy. The subsidy report of the Federal Government will take a closer look at whether the measures are sustainable. Source: Bundesregierung

6 Political notifications in Germany Climate Action Programme 2020 The German government s subsidy policy follows guidelines stipulating that environmental aspects be taken into account ( ). One of the aspects the planned review of existing subsidies will look at is their environmental sustainability. This includes a review of whether they have a climatedamaging effect. At the same time, initiatives at EU and international level to abolish climate-damaging subsidies are being supported. Source: BMUB

7 Outline 1. Political notifications in Germany 2. Environmentally harmful subsidies in Germany 3. Fossil fuel subsidies: examples 4. Conclusion 7

8 Environmentally harmful subsidies in Germany > 21 bn. energy supply/use > 24 bn. transport > 52 bn. Subsidies in 2010 Broader subsidy definition than official government report 8

9 Outline 1. Political notifications in Germany 2. Environmentally harmful subsidies in Germany 3. Fossil fuel subsidies: examples 4. Conclusion 9

10 Example: Fossil fuel subsidies in the transport sector road transport air travel 7.1 bn. Energy tax reduction for diesel fuel 16,3 Mrd. Straßenverkehr 5.0 bn. (Commuter tax allowance) 4.2 bn. (company car tax credit) 6.9 bn. No energy tax on kerosene 10,4 Mrd. Luftverkehr 3.5 bn. VAT exemption for international flights Source: UBA 2014, own calculation FÖS 10

11 Example: subsidies for air travel Subsidies: 11.5 Billion EUR Energy tax exemption 7.3 Billion EUR VAT exemption 4.2 Billion EUR Proposed action: Global reduction of exemptions Appropriate Ticket Tax Bild: CC-BY-SA via Flickr/BenJTsunami 11

12 Example: Fossil fuel subsidies for industry through energy price reductions Energy price exemptions for industrial consumers Power prices 2015 (BDEW 2016): private households 28.7 ct/kwh Industry GWh/year 9.8 ct/kwh Energy-intensive industry ct/kwh Source: FÖS 2013 > 16 bn. subsidies reduce energy prices and distort investments in energy efficiency International regulation and harmonisation would minimise risk of carbon leakage --> G20 is a good start Subsidies should focus on real carbon leakage risk sectors and perverse incentives should be avoided 35

13 Outline 1. Political notifications in Germany 2. Environmentally harmful subsidies in Germany 3. Fossil fuel subsidies: examples 4. Conclusion 13

14 Conclusion for the G20 process Broader subsidy definition allows for the identification of financially meaningful regulation Main areas: coal mining, industrial energy prices, air travel and diesel use German national self report should include fossil fuel subsidies with a broad subsidy definition transparency as a role model for other countries effects of some subsidies need to be examined more carefully more comprehensive sustainability assessment consider policy alternatives to the current arrangements G20 process should be used to display national leadership Next steps: phasing out subsidies and pricing carbon 14

15 Vielen Dank für Ihre Aufmerksamkeit! Thank you for your attention Forum Ökologisch-Soziale Marktwirtschaft (FÖS) Schwedenstraße 15a, Berlin Tel: Swantje Fiedler Director Energy Policy