Bär, H. et al.Ecological financial reform: Product-related incentives as a driver of environmentally friendly production and consumption patterns

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Holger Bär, Ann-Cathrin Beermann, Katja Schumacher, Anne Siemons, Friedhelm Keimeyer, Rafael Postpischil & Klaus Jacob

Release date:
September 2022

German Federal Environmental Agency (UBA), texts | 100/2022

In this project, options for the taxation of products were elaborated, looking at an environmentally oriented value-added tax both within the existing European legal framework and possible changes to EU law; as well as excise duties and other product-related economic instruments. The focus of this report is on excise duties, which have the potential to lower the overconsumption of scarce resources, reduce emissions and waste, and provide economic incentives for the recycling of products to recapture raw materials. In addition to taxes, the analyses also address other product-related economic instruments such as deposit systems or the expansion of producer responsibility.

In the German fiscal constitution, excise taxes are narrowly defined. They must regularly refer to 'goods of permanent private use'. Options for excise taxes with an ecological steering effect are, for example, an excise tax on cement coupled with climate protection contracts for largely climate-neutral cement, the exemption of sustainable coffee from coffee tax and a tax on carrier bags. Other economic instruments that have been examined are a pricing of air freight within the framework of an air freight tax, the transfer of costs to manufacturers of single-use plastic products within the framework of extended producer responsibility or a deposit on lithium-ion batteries.

Additional room for maneuver to achieve an ecological steering effect through economic instruments could be opened up by amending the financial constitutional requirements of the Basic Law – e. g., by explicitly allowing 'environmental levies' or 'levies on emissions'. Value added tax and excise duties can primarily achieve environmental effects in private consumption. Environmental impacts on production can only be addressed indirectly and somewhat imprecisely. Manufacturers are only indirectly affected by the change in consumption, but not in their competitive position vis-à-vis foreign suppliers. A national introduction is more feasible and can provide impulses for more far-reaching international initiatives.

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