all projects

Reforming
environmentally
harmful subsidies

Client

Bertelsmann Stiftung

Year

2023

Partner

Forum Ökologisch-Soziale Marktwirtschaft


How harmful to the climate are state subsidies in the transport and industry sectors? And can reforms protect the climate by saving money and redistributing it more effectively?

These questions are taken from the “Reforming climate-damaging subsidies” study conducted on behalf of the Bertelsmann Stiftung. The Forum Ökologisch-Soziale Marktwirtschaft (internationally known as Green Budget Germany), worked on propositions for reform while Prognos experts calculated their respective impacts.

Contradictory subsidies should be phased out

Subsidies such as the diesel rebate damage the climate. To achieve its climate goals Germany will have to reduce both direct and indirect subsidies that promote greenhouse gas emissions.

The study shows:

  • Even if Germany does not use the saved subsidy expenditure to finance decarbonisation, the negative economic effects are very small
  • Subsidising the use of fossil fuels while at the same time trying to avoid their use via other state-funded measures, is economically unwise

Reforms can have positive ecological and financial effects

The impact estimation and modelling for industry conducted by Prognos shows that reforms can have positive ecological and fiscal impacts, while only impacting cost effects on market shares, production, and employment, to a minor extent.

The modelling in the transport sector points to a substantial dismantling of subsidies. The reform of company car taxation or the diesel tax would lead to increased income tor the state, while at the same time reducing CO2.

It should be noted that our models are unable to illustrate all action/effect mechanisms and in terms of the company car reforms, in particular, we can assume far greater effects. On the one hand, faster electrification would lead to less emissions, equally, it also leads to less additional revenues due to the decreased taxation of electric company cars.

Overall, the distribution effects of the reforms are positively assessed.

Links and downloads

Study (PDF, in German)
More on the Bertelsmann Stiftung website (in German)

Project team: Andreas Brutsche, Alex Auf der Maur, Dr Andreas Kemmler, Dr Jan Limbers

Last update: 17.11.2023

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