This Monday, the Advisory Council for Consumer Questions (SVRV) is handing over a study on the fair design of CO2 pricing to the Federal Ministry for the Environment and Consumer Protection. The study shows that if designed correctly, it benefits consumers and protects the climate. In a representative survey, nine out of ten adults in Germany state that they consume in an environmentally friendly manner. But how big their own CO2 footprint, i.e. the CO2 emissions caused by their consumption, actually is, is unknown to the vast majority – and around a sixth expressly do not want to know.
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There is immense pressure to act when it comes to climate protection – after all, Germany is one of the world’s largest emitters of CO2 per capita and is roughly on a par with China. If it is possible to reduce emissions by switching to climate-friendly consumption, then this can serve as a role model for other regions of the world.
One thing is clear: shifting the responsibility for climate protection onto each and every individual will not achieve much. This becomes clear from the study by the Advisory Council for Consumer Questions (SVRV). Rather, the state should further develop CO2 pricing as a key instrument of German climate policy and make it fair. This would make it much easier for consumers to make climate-friendly decisions, because then a look at the price tag of a product would be enough.
The basic idea of ​​CO2 pricing is that companies pay for their CO2 emissions, for which there are already different emissions trading systems. In order to avoid the costs arising from emissions pricing, companies will try to make their production processes more climate-friendly. Consequence: The selection of low-emission products is growing and becoming increasingly attractive for consumers because they can be offered more cheaply than their fossil alternatives due to the lower CO2 costs.
However, politicians are facing major challenges because there have always been reservations about CO2 pricing. In particular, it is feared – rightly so, depending on how it is designed – that consumers with low and middle incomes will ultimately be financially overburdened, which would be unfair and could jeopardize acceptance and thus political feasibility. Because it is also true that climate-damaging products are becoming more expensive as a result of CO2 pricing.
In Germany and the EU, there is currently a debate about the use of income from CO2 pricing. Large sections of science are in favor of extensive redistribution of income from CO2 pricing to the population. In line with this, the coalition agreement contains a possible redistribution mechanism under the keyword “climate money”. In this way, the financial burdens resulting from CO2 pricing could be mitigated in a targeted manner or even avoided for those on low and medium incomes.
If CO2 were priced without any redistribution, the following would apply: people with lower and middle incomes pay less for CO2 in absolute terms (because they consume less) than people with high incomes – but are financially more heavily burdened in relation to their income. Those who live in an unrenovated house with a large living area to be heated and who have to travel long distances by car are particularly at risk.
With a view to the acceptance of CO2 pricing, a credible and transparent redistribution is of paramount importance: people will only support the instrument if CO2 pricing is not perceived as an additional tax but as a clever steering mechanism. This is likely to apply in particular to people in lower and middle income groups who are already finding it difficult to bear further burdens.
Redistributing the income in the form of a per capita flat rate would be an obvious option. Due to their low CO2 footprint, lower and some middle income groups would be relieved on average, only the higher income groups would be in a slightly worse net financial position than before – albeit to a reasonable extent. The SVRV survey also underlines that households in the upper income bracket have significantly more options and financial leeway to reduce their CO2 footprint through targeted investments, for example in an emission-neutral heating system, and thus avoid increasing CO2 pricing more quickly.
In various scenarios, the SVRV therefore shows how the net relief for these consumers could be achieved not only on average, but also in almost all individual cases, by redistribution, particularly to lower income groups. One could, for example, subject the refund of income tax in order to relieve lower income groups more. In addition, if you then actively reduce your own CO2 emissions, you can increase your own net reduction in a targeted manner. For this reason, opportunities should be created at an early stage to avoid the costs of CO2 pricing by changing individual behavior and consumption, for example by expanding public transport.
Another current online survey of German consumers carried out for the SVRV shows that even after the attack on Ukraine and despite the current price increases for fossil fuels, around half of those surveyed are still open to CO2 pricing. In order to ensure effective climate protection in Germany and Europe, politicians should now do everything possible to anchor CO2 pricing in connection with a credible, transparent and sustainable redistribution mechanism and to communicate it proactively. There are good arguments that lower incomes should be given more consideration in redistribution. The important thing is that it must be credible, especially for this group, that the redistribution actually reaches them.
