Germany Environmental Taxation Reform (ETR) History

Germany's interest in environmental tax reform was seen "as part of a more general overhaul of the tax system, [as] the German ETR was largely motivated to facilitate the allocation of production processes and demand towards technological innovation, and the creation of additional jobs.^[1]"  The German Institute for Economic Research (DIW) corroborated this by reporting in 1994 that “energy consumption and unemployment would considerable decrease and unemployment would considerably decrease,[2]” approximating that 600,000 new jobs would be created over 10 years. Moreover, they found that there would no significant negative effect on GDP growth or inflation.

 Moving forward, on April 1st, 1999, Germany implemented their first ETR policy of two, “Law on the Introduction of the ETR”, endorsing "five energy tax increases over a period of five years^[3]" overall, with the two explicit  goals of an “environmental objective” and “economic/employment objective.^[4]”

1. Environmental objective: “to improve environmental protection and in particular reduce greenhouse gas emissions as a means of climate change mitigation.^[5]”

2. Economic/employment objective: “to reduce the employers’ and employees’ statutory pension contributions (social security contributions) in order to reduce labour costs and increase employment.”^[6]

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[1] Agnolucci. (2009) "The Effect of the German and British environmental taxation reforms: A simple assessment." Energy Policy 37 3040-3051.   

[2] Ibid.

[3] Agnolucci. (2009) "The Effect of the German and British environmental taxation reforms: A simple assessment." Energy Policy 37 3040-3051.   

[4] Speck, 2008.

[5] Ibid.

[6] Ibid.