All I want for Christmas is new taxation – and….

Have you been naughty or nice this year? If you were the former, congratulations – you just helped the federal budget. As Craig Morris points out, our efforts to do the right thing have a hidden price tag – they reduce tax revenue. Most of all, he wonders why more people haven’t asked for the thing he wants for everyone from Santa this year.

Santa Claus

Merry Christmas!


Dear Santa,

You probably grow weary of everyone asking you for toys and world peace, so I have an unusual request this year. You see, the taxes we have will increasingly prove to be an obstacle during the energy transition.

Take the suggestion from the Christian Socialists (CSU) of Bavaria for tolls on German roads for example. This month, the German government announced a verson of it will made law. Originally, the CSU proposed the idea of having everyone, including naughty foreigners, pay to use German roads (not just the autobahn). The Germans pay for their roads with an annual (domestic) tax based on the size of the car’s engine and CO2 emissions.

The German public clearly does not want toll roads, and experts gave people objective reasons for their dislike. The environmental taxation NGO Green Budget Germany calculated that the high administrative costs of the proposed toll charge would practically wipe out any additional revenue (PDF in German); you might as well just raise the tax on gas by a cent.

But there is also a good reason for tolls. If we don’t change the way taxes for roads are collected, tax revenue will drop. As an incentive, electric cars are exempt from the road tax for 10 years if purchased by the end of 2015 and for five years if bought from 2016 to 2020. If Germany has a million electric cars by 2020 as planned, that’s a lot less tax revenue.

Then, there’s the gas tax. Efficient cars will reduce tax revenue from the tax on fossil fuels a little; electric cars, a lot. The German government posted some 620 billion euros in tax revenue in 2013, and around 40 billion of that was the tax on fossil fuels – the largest single purely federal tax.

Yet, Santa, only a tenth of the fossil fuel tax is used to build roads, with the rest being used for all kinds of other things. We have the same phenomenon with the “concession levy” in the power sector as well. Around two cents per kilowatt-hour – roughly 7 percent of the retail power rate – is used by communities to build swimming pools, subsidize public transportation, and do lots of other good things. Germany has a tradition of financing public services with energy consumption.

Communities face lower revenue from the concession levy because power purchased from the grid is dropping – by around five percent this year alone, partly because of efficiency, but also because more Germans are making their own electricity and buying less from the grid. Likewise, the grid fee is also charged based on consumption levels, so there is less revenue as consumption drops.

The problem crops up repeatedly. Germany just adopted a climate package, but allowing people to write off expenses for insulation reduces tax revenue, as does the resulting lower consumption of heating oil and gas.

We could cover fixed expenses with fixed charges. Aside from mobile connections, we don’t pay to surf the Internet by the gigabyte; we pay a monthly rate based on the speed of our connection. Likewise, we could also charge grid fees – and maybe the concession fee – by the size of the power connection, not the amount of power consumed. The government is currently looking into different designs for the grid fee. But no one is really talking about the concession levy.

Santa, whatever we do, we have to get people to accept these changes as well. I thought of an incentive. You know that sled of yours? The one you fly around the planet on in a single night? The one you can also drive around the corner with? The one that runs on sustainable biomass? The one with the red signal light? The one with the seemingly endless luggage space? The convertible that’s magically warm enough even at the North Pole?

Give us all one of those, and we’ll be flexible on the taxes.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.

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Craig Morris (@PPchef) is co-author of Energy Democracy, the first history of Germany’s Energiewende.

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