The transport sector accounted for the majority of environmentally harmful subsidies in 2010 (24.4 billion euros), followed closely by energy production and consumption (21.6 billion euros). The construction and housing sector accounted for 5.9 billion euros; agriculture and forestry/fisheries or another half a billion euros. It is especially difficult to track subsidies in the agricultural and forestry/fisheries sector, and therefore the real level of environmentally harmful subsidies in these sectors is in fact much higher.
The new UBA study is an analysis of which subsidies are promoting climate change, impairing the quality of water, soil and air, which lead to health problems and which increase the consumption of land and resources. The study also makes concrete proposals for reform, for example of the tax break for regular commuters. Maria Krautzberger said: "The commuter allowance encourages urban sprawl and traffic growth. The associated air pollution and noise are a burden on our health. The elimination of the commuter allowance must, of course, be socially equitable." The UBA has proposed that only very high costs for the journey between home and work be recognised as extraordinary expenses deductible for income tax purposes. This would allow those people who would otherwise have to bear an unreasonable burden to continue to claim the costs of their commute as a tax deduction. The money which the government would save by such a reform could be used to expand the public passenger transport network or to cut income taxes.
There is also great potential to cut subsidies in the electricity and energy tax relief granted to the manufacturing sector and to agriculture and the forestry industry. Since the tax breaks lower the incentive to use energy efficiently, they should be reduced and limited to the energy-intensive businesses which face extraordinary international competition.
Subsidies policy of recent years in general has developed disparately. Whereas a few environmentally harmful subsidies will be phased out in the next few years or have been scaled back, such as the owner-occupied homes premium or support for coal production, others have been expanded or new subsidies have been introduced. One example is the tax rebate for agricultural diesel fuel, which leaves farmers with very little incentive to be economical when driving machinery or to purchase efficient farm equipment. Another example is the newly introduced compensation for electricity costs granted to companies to offset the power price increases associated with emissions trading. These measures also reduce the economic incentives to save energy and protect the climate.
The UBA advocates the introduction of environment-oriented subsidy management control as a way to launch a systematic reduction of environmentally harmful subsidies. "We need an 'environmental check' of subsidies which reviews all subsidies with a view to their possible negative environmental impact and which exercises a regular review of their effects and success. It would become a key element of the sustainability impact assessment of subsidies which was agreed upon in the coalition agreement", said Maria Krautzberger.
The study focuses mainly on the subsidies at federal level and only in a few cases on those at state level. Moreover, many environmentally harmful subsidies cannot be quantified with precision. "The scale of environmentally harmful subsidies in Germany is in fact on a clearly high order than the 52 billion euros cited in our study. This fact also underscores the need for action," said Ms Krautzberger.
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