XXII SEMINARIO REGIONAL DE POLÍTICA FISCAL CEPAL, Naciones Unidas Santiago de Chile, 26 al 29 de enero de 2010

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1 XXII SEMINARIO REGIONAL DE POLÍTICA FISCAL CEPAL, Naciones Unidas Santiago de Chile, 26 al 29 de enero de 2010 Incentivos para una economía baja en carbono: Enfoques de reforma fiscal ecológica Dr. Detlef Schreiber, GTZ Anuschka Hilke, GTZ & Kai Schlegelmilch, Green Budget Germany Seite 1

2 Seite 2 Page 2 Incentives for a low-carbon economy: Approaches of an Environmental Fiscal Reform Contents Germany s Ecological Tax Reform Overall impacts of the reform Germany in comparison with other European countries GTZ s support in knowledge sharing on EFR Experiences from selected emerging economies in Asia Pollution taxation in China Conclusions

3 ETR in Germany (I) Revenue-neutral shift of tax burden from distorting labour taxes and charges to energy tax 5 major yearly steps between 1999 and 2003 Energy taxation Increase of taxes on fossil fuels used for transport and heating New tax on electricity Special provisions for energy-intensive production Reduced rates for environmentally-friendly technology / renewable energy Phasing-in by announced and small increases Seite 3 Page 3

4 ETR in Germany (II) Apart from environmental concerns, the high unemployment (>10%) was the major concern High unemployment was not helped by the statutory contributions of 42.3% of payroll in 1999 In order to achieve a double dividend, revenues were used as follows: Revenue recycling 86% for reduction of social security contributions ~6% for supporting renewable and energy efficiency ~8% as contribution to general budget Seite 4 Page 4

5 Seite 5 Page 5 Overall impacts of energy price increases (including ETR) Fuel consumption (-17%) Unloaded truck mileage (- 2% between ) Fossil fuel imports (-13%) Overall tax burden (-4 %) Less More Car sharing (+70%) Public transport (+5%) Energy saving technologies Energy efficiency Gas-powered cars (x10) Biofuel cars (x2) Renewable energies

6 Direct impacts of ETR only CO 2 -emissions (2-3%) Tax on goods : Pension costs (-16 bn or -1.7%) Costs for industry (- 1 bn) + Partly also the impacts shown on the previous slide Less More Tax on environmental bads : energy taxes ( bn) Employment (+250,000 jobs) Pensions (+1.2%) + Partly also the impacts shown on the previous slide Seite 6 Page 6

7 All EU countries have some green taxes Taxes CO2 SO2 NOx Fuels S in fuels Car sales and use Diff. annual car tax Water effluents Waste-end Dangerous waste Aviation noise Tyres Beverage cont. Packaging Bags Pesticides CFCs Batteries Light bulbs PVC/phtalates Lubrication oil Fertilisers Paper, board Solvents Raw materials Belgium Denmark Finland France Germany Italy Holland Norway Sweden UK INTRODUCED: Witness of EU-Creativity! 2. Many roads to Rome! 3. Autonomy from neighbours! 4. Similar situation in new MS Examples from EEA Page Seite 7

8 Seite 8 Page 8 Impact of Environmental Fiscal Reforms on GDP In % No country suffered from lower GDP, and in most cases it increased slightly! Source: COMETR 2007

9 9 Kai Schlegelmilch Seite 9 Page 9 Effect of EFR on green house gas emissions (difference to base case in %) 3.3% in Germany Ecotaxes reduced GHG emissions by 2-6 percent

10 Page Seite 10 Technical Cooperation: GTZ gives support to partner countries engaged in Environmental Fiscal Reforms Provide experts, technical support and advisory services (China, India, Vietnam etc.) Trainings on Environmental Fiscal Reform (EFR) and related areas: payments for environmental services, SEA Strategic Environmental Assessment, key competences for sustainable development Foster dialogue and coordination between different ministries, specially the finance and environment authorities, Support identification, development and implementation of economic instruments and financing mechanisms

11 Page Seite 11 Sharing knowledge & lessons learned OECD-DAC: EFR-Guidelines GCET Global Conference on Environmental Taxation (2007: Munich; 2009: Lisboa; Novermber 2010: Bangkok, Thailand)

12 Environmental Taxes in Vietnam Environmental Tax Reform (ETR) to be introduced by A framework environmental tax law is to be submitted to the National Assembly by 2010 (it shall include all relevant pollutants as well as the expenditure side) GTZ supports the process of drafting the law via: international expert missions to vietnam study tours to Europe training on EFR for representatives of the ministry the organisation of workshops expert comments on draft versions of the law Seite 12 Page 12

13 Seite 13 Page 13 EFR in China I: Pollution Taxation Experiences with a nation-wide system of pollution charges introduced in 1980s (waste-water, air emissions, solid waste); new environmental taxes under discussion, incl. CO2 GTZ supported Task Force on Econ. Instruments for Energy Efficiency and the Environment (CCICED - China Council for International Cooperation on Environment and Development) Recommendations to Chinese Premier Wen Jiabao (Nov. 2009): Gradual introd. of environm. Taxes part of a wider tax reform Focusing on priorities such as: water, air and solid waste The development of a suitable carbon tax scheme for China based on international experiences

14 Seite 14 Page 14 EFR in China II: Results of CCICED Task Force Raising energy prices is an effective long-term incentive to improve energy productivity Environmental taxation will not bring about negative impact on economic growth but rather may even favour economic development Establish environmental taxation system step by step Consider economic and social realities... easy ones first, hard nuts last approach Choose the right timing... (impact analysis) Create favourable environment

15 EFR in China III: CCICED Policy Recommendations Develop a green economy and speed up green transformation Develop low-carbon-economy... Implement a national strategy for sustainable use of coal Take more innovative approaches to address the key energy and environment issues in urban development Strengthen policies for energy and environment in rural development including... climate change adaptation Reform and improve economic instrument policies... increasing the capacity of energy efficiency and environmental management Develop a green 12 th Five-Year National Economy and Social Development Plan Seite 15 Page 15

16 Seite 16 Page 16 Absolute decoupling of economic growth (quality of life) from resource consumption & environmental degradation is needed: EFR = powerful tool that can yield double dividend Quality of life Economic Growth Resource productivity Resource Consumption GHG Emissions Environmental degradation Time

17 Seite 17 Page 17 Final considerations on EFR ETR <-> EFR: It`s not all about revenues, don t forget expenditure side: environmentally sound public spending ETR & Sustainable Development => making tax systems ecologically more sustainable EFR is an important approach towards greenhouse gas mitigation EFR should be part of a more holistic approach like Green Economy (Rio 2012!), going hand in hand with: Science, technology & innovation policies SME development and job creation in new areas etc.

18 Thank you very much for your attention! Further information is available here: GTZ work on environmental policy: China: Green Budget Germany on EFR in Germany and Europe: Contact: or Seite 18 Page 18

19 Additional Slides Seite 19 Page 19

20 II. Laws to introduce and to continue Ecological Tax Reform in Germany Law Gesetz zum Einstieg in die ökologische Steuerreform: Law launching the reform: petroleum taxes on motor and heating fuels were raised and a tax on electricity was introduced Gesetz zur Fortführung der ökologischen Steuerreform: Law continuing the reform: petroleum taxes on motor fuels and electricity tax rate were raised in four more phases from 2000 to 2003 Gesetz zur Fortentwicklung der ökologischen Steuerreform: petroleum tax rates on natural gas, LPG and heavy heating oil wer raised Gesetz zur Neuregelung der Besteuerung von Energieerzeugnissen und zur Änderung des Stromsteuergesetzes (Energy Tax Act ): Energy Taxation Directive (2003/96/EC) was transposed into German law Biokraftstoffquotengesetz (Biofuels Quota Act): Petroleum industry is required to market a statutory minimum quota of biofuels; tax exemptions for pure biofuels are reduced step by step Come into force 1. April January January August January Kai Page Seite 20

21 II. ETR since Tax Rate Increases Steady increases in : Electricity tax 1.02 Ct/kWh in 1999 (+0.26 Ct/kWh p.a. between ) Mineral oil taxes on transport fuels: (+3.07 Ct/litre p.a. between ) Single increase in 1999 (+2003) only: Tax on natural gas Ct/kWh (+0.2 Ct/l in 2003) Tax on light heating oil: Ct/litre : Introduction of a tax on coal for heating purposes Tax rates on electricity and transport fuels are relatively high in EU, energy tax rate on light heating oil is relatively low 21 Kai Page Seite 21

22 II. Tax rates after reform of energy taxation in 2006 /MWh Tax Rates in the Transport Sector (since from ) 80 72, (65 Ct/l) 47,5 13,9 13, Gasoline Diesel Fuel Natural Gas LPG RME (47 Ct/l) 22 Kai Page Seite 22

23 23 Kai Page Seite 23 II. Tax rates after reform of energy taxation in 2006 Tax rates in the heating and electricity sector of German energy taxation (since since ) /MWh 1,2 1,2 2,2 6,1 4,7 5,5 7,8 Hard Coal Lignite Heavy Heating Oil Light Heating Oil Liquid Petroleum Gas Natural Gas Electricity (primary energy)

24 24 Kai Page Seite 24 II. ETR since Tax Revenue Ecotax revenues: 18.0 bn in 2005 (total energy taxation: 46.9 bn ) To a large extent revenue neutral, but some mn are used for environmentally motivated investment programmes - financial support of renewables, building modernisation - tax concessions e.g. for public/rail transport, biofuels, CHP Reduction of employers and employees social security contributions by overall 1.7 percentage points Role of environmental taxes has been strengthened - but tax shift is only 0.8% of GDP or 1.6% of total tax revenues: two thirds of total revenues of taxes and social security contributions are still burdened on labour

25 25 Kai Page Seite 25 II. Structure of German tax system and changes by EFR 19,7% 22,3% 8,9% 16,6% 15,0% 10,1% 18,3% 15,3% 15,9% 12,6% 11,7% 7,2% 7,0% 21,0% 19,9% 16,4% 11,3% 7,0% 17,8% 16,8% 11,8% 7,2% 17,8% 16,4% 9,5% 8,6% 16,7% 16,6% 11,1% 8,5% 15,2% Faktorneutral Kapital Umwelt 13,5% Steuern auf Arbeit 35,4% 40,0% 43,9% 45,6% 47,5% 46,4% 48,8% 48,6% Sozialversicherung Jahr 5. Jahr

26 II. ETR Tax Concessions (1) 1. To take into account industry s concerns about competitiveness Reduced ecotax rates on heating fuels and electricity (not for transport fuels) for manufacturing, farming and forestry (1999); increase of reduction rate on oil and gas for heating purposes (8/2006) Net-burden compensation for manufacturing industries (1999) Exemption of energy used for certain energy intensive industry processes (since ) tax reduction for energy use on sea ports (since ) Bundestag asked the government to make a suggestion for a compulsory energy management system by , but in 2007 postponed until But in 2008 advanced to phase-in-time Value of tax concessions for industry and CHP is 5.4 bn in 2005 additional tax concessions since 2006 count for roughly 0.2 bn Additionally there are some tax exemptions on basis of EU directive for non-energetic use and internal consumption of refineries 26 Kai Page Seite 26

27 27 Kai Page Seite 27 II. ETR Tax Concessions (2) 2. To promote environmental effects: - rail transport and local public transport - natural gas in the transport sector - low-/no sulphur containing fuels - cogeneration plants - renewables - in heating sector: exempted - in transport sector: exemption until ; details of change to quota system see following slides - in electricity sector: no exemption - Tax differentiation for heating oil with low sulphur content (starting announcement effect is used) 3. Abolition of taxes on energy inputs in electricity sector ( ) 4. For social reasons: - lower electricity tax for night storage heating (until )

28 28 Kai Page Seite 28 III. From ETR to EFR - measures of Red-Green government Realised measures in income tax / others / energy taxation (in bn ) Value of fiscal impulse Effect on public budget 2004: Reduction of support of housing (for private buyers) (subsidy reduction of 2.5 bn after 8 years) 2004: Reduction of commuters lump sum (deductability from income tax) from 40.9 ct/km to 35 ct/km : Reduction of coal subsidies : Introduction of heavy vehicle charge : Introduction of emission trading (market value 5-15 /EUA) 2003: Introduction of deposit refund system on one-way packaging : Ecological Tax Reform (energy taxation) 18.0 Total volume of initiated measures (in bn )

29 III. Fiscal measures of Grand Coalition with environmental relevance Initiated or realised measures in income tax / energy tax Abolition of support of housing (for private buyers) from (subsidy reduction by 5.9 bn after 8 years) Commuters lump sum (deductability from income tax) from only from 21. kilometer Taxation of biofuels from ; introduction of a quota system with full taxation of biofuels within quota 29 Revenue long run Revenue Abolition of taxes on energy inputs in electricity sector Introduction of taxes on coal for heating purposes Additional tax allowances (e.g. tax exemption of certain industry processes, sea ports) Total volume of initiated measures (in bn ) Further planned measures: - reduction of coal subsidies - tax incentives to equip old vehicles with particle filters - reform of the annual vehicle tax towards a CO 2 -basis - stronger differentiation of heavy vehicle charge towards emissions Kai Page Seite 29

he Ecological Tax Reform in Germany or How to sell tax increases? Kai Schlegelmilch Vice-President FÖS/GBG Green Budget Germany

he Ecological Tax Reform in Germany or How to sell tax increases? Kai Schlegelmilch Vice-President FÖS/GBG Green Budget Germany based on the German advertising campaign the double dividend-principle of