When Germany’s tax on carbon emissions was introduced at the beginning of 2021, it was marketed as a way of incentivising climate-friendly forms of energy. But according to a new study, the brunt of the extra cost is being largely borne by consumers, and some are suffering a lot more than others. 

German CO2 tax has greater impact on low-income households

A new study has found that the CO2 tax (CO2-Preis) in Germany, which has been in effect since January 2021, has the greatest impact on households with low incomes. The expert report, commissioned by the Federation of German Consumer Organisations (VZBV), found that measures adopted so far to compensate consumers for higher fuel prices benefit households with higher incomes more than low-wage earners. 

The report showed that, for the year 2021, households belonging to the highest income bracket in Germany will be compensated for about 30 percent of their additional costs incurred through the CO2 tax, via schemes such as the commuter allowance, the lowering of the EEG surcharge, and the introduction of the so-called mobility premium. The bottom half of earners, however, will only recover about 10 to 17 percent of their increased costs. 

The authors of the study concluded that the unequal relief effect between income groups is primarily due to the commuter allowance - which was raised earlier this year to offset the rising cost of fuel for frequent drivers, but which benefits higher earners more because of a difference in tax rates. “This study’s calculations show that these measures are not sufficient,” the report concluded. “Low-income households in particular hardly benefit or not at all.” 

Consumer association calls for public transport to be expanded

VZBV board member Klaus Müller called on politicians to provide more relief for low-income families. “Households with low incomes are suffering from rising fuel costs and urgently need political support,” Müller said. Among other things, the association is calling for public transport to be significantly expanded and for an income-dependent mobility allowance to be introduced. 

The CO2 tax has been in effect since January 2021 and currently stands at 25 euros per tonne of carbon dioxide. It is set to rise in the coming years in order to make the use of fossil fuels in transportation and buildings less attractive. This year already, the surcharge has increased the price of petrol and diesel by seven to eight cents per litre.