Economic expert: CO₂ pricing is more socially balanced than purchase premiums

Created: 01/10/2022, 10:16 AM

By: Alexander Eser-Ruperti

The common assessment is that CO₂ pricing puts a particular strain on lower income groups.

In an interview with the Kreiszeitung, economic expert Veronika Grimm offers a different perspective.

Berlin - CO₂ pricing will gradually increase over the next few years.

While the costs were 25 euros per tonne of CO₂ in 2021, it will be 30. By 2025 the price should be at least 55 and a maximum of 65 euros.

The CO₂ pricing also affects the social question: A study by the Federation of German Consumer Organizations (vzbv) comes to the conclusion that poorer people are more heavily burdened by the CO₂ price * and that more extensive funding is required.

Veronika Grimm contradicts this and sees the income from CO₂ pricing as an opportunity to relieve lower-income sections of the population on a net basis.

How does that work?

Economics calls for relief in the electricity price and advocates high CO₂ pricing

Prof. Dr.

Veronika Grimm holds the Chair of Economics at the University of Erlangen-Nuremberg and is also represented as an expert on various committees.

These include the Advisory Council for the Assessment of Macroeconomic Development (Die "Wirtschaftsweise") and the Advisory Council for Consumer Issues (BMJV).

According to Veronika Grimm, CO₂ pricing could be much more socially balanced than other climate protection measures.

© Julian Stratenschulte / dpa

On the connection between CO₂ pricing and social issues, Prof. Dr.

Veronika Grimm in an interview with the Kreiszeitung newspaper: “You always have to remember that you generate income through CO₂ pricing.

This income can be used to provide relief ”.

According to Grimm, the electricity price in particular should be reduced by abolishing the EEG surcharge and reducing the electricity tax as much as possible.

This relief must take place quickly and consistently and be well communicated, also in order to achieve acceptance for the pricing of emissions.

In the interview, too, she leaves no doubt that she is fundamentally in favor of high CO₂ prices in the interests of climate protection.

Prof. Dr.

Veronika Grimm: Despite gas prices and CO₂ pricing, lower income brackets can be relieved

As long as the successively rising CO₂ prices are still relatively low, Grimm sees the possibility of even reducing the burden on people from lower income groups on a net basis. The economic expert told the local newspaper that she thought this was possible “because people in the lower income bracket often have a relatively low carbon footprint,” they don't own two cars or go on vacation to Hawaii. The possible relief from the electricity bill could therefore, if it were operated consistently, exceed the burden from CO₂ pricing.

According to Grimm's assessment, this is especially true in the phase where CO₂ pricing is still moderate, up to prices of around 50 euros per tonne of CO₂.

These mind games assume that the income from CO₂ pricing and possibly an amount beyond that would consistently be put into lowering electricity prices.

Despite rising electricity and gas prices: an economic expert considers CO₂ pricing to be socially balanced

If you use the income to relieve consumers, the CO₂ pricing can be designed in a socially acceptable way, says Grimm. In view of rising electricity and gas prices *, the additional burden of CO₂ pricing caused displeasure in some places. With reference to gas wholesale prices, the economic expert had recently stated that these would fall again in perspective *, but when, that was unclear.

Veronika Grimm gives the debate about CO₂ taxes a new perspective - she says that the possible social compatibility "very clearly distinguishes the approach of CO₂ pricing, while at the same time consistently relieving the burden on income, from other measures".

On the other hand, the economy considers purchase premiums for electric cars * and special subsidies for small PV roof systems to be “socially unbalanced” because “the subsidies mostly benefit those with higher incomes”.

"The typical electric car these days is often a second car," notes Grimm and adds, "You only have a solar system on the roof if you also own the house".

She considers these aspects to be underrepresented in the discussion of previous climate protection programs.

Veronika Grimm: Relieve lower income brackets with electricity prices

According to Veronika Grimm, the burden on lower income groups can be relieved particularly in the coming years when CO₂ prices are still relatively moderate.

During this time, the electricity price should be relieved.

For the time after that, she says "You have to start creating the conditions today so that people with low incomes can switch to low-CO₂ behavior in the medium term."

To this end, the options for using local public transport must be improved and expanded.

For individual mobility, e-cars should be an attractive alternative for everyone in the medium term.

According to Grimm, the time window to create the prerequisites for participation extends to around 2025.

Then the CO₂ pricing has reached a level that can no longer simply be compensated for by reducing the burden on electricity consumption, for example.

By then, lower and middle income groups must have the opportunity to avoid the costs of CO₂ pricing - in other words: to have switched to a certain extent to climate-friendly alternatives.

Climate protection: CO₂ pricing is a decisive lever - infrastructure expansion is urgently needed

When asked about the importance of CO₂ pricing, Veronika Grimm has a clear stance. For the economic expert, pricing is the decisive lever in climate protection - but not the only one. She also considers the rapid expansion of infrastructure to be decisive, with the state also having a duty. Due to the risk and time pressure, the investments would not be made purely by the private sector, according to Grimm.

Speeding up climate protection is impossible without the rapid development of infrastructure. This also applies to battery mobility, because “what should I buy a car that I can't drive everywhere, nobody does that,” as the expert says. The infrastructure must be expanded quickly not only nationally, but also across Europe "(...) because people simply do not buy cars that they can no longer move really well as soon as they cross the border".

The economics professor at the University of Erlangen-Nuremberg sees the infrastructure expansion as complementary to CO₂ pricing: The pricing makes the electric car fundamentally more attractive than the combustion engine, but its use would only be possible to a limited extent without a comprehensive infrastructure.

A cost comparison of the operating costs is ultimately of no use if the “cost comparison is purely hypothetical,” says Grimm.

Electric cars: CO₂ pricing is supposed to make combustion engines less attractive, but not to encourage private transport

Veronika Grimm is critical of the direct promotion of vehicles.

She thinks it makes more sense to make electromobility fundamentally more attractive by means of CO₂ pricing and the expansion of the charging infrastructure.

If it has its way, climate-friendly electricity should become cheaper and emissions more expensive, so that climate-friendly alternatives are also financially more attractive.

The promotion of a special type of vehicle is always also the subsidy of certain industries, according to Grimm, but above all a promotion of individual mobility - "You kind of force people to buy a second car".

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The Veronika Grimm economy would therefore rather focus on consistent infrastructure expansion - also in the area of ​​the charging stations. So far there has been a lack of infrastructure *, the experience with charging stations is often bad. * Transport Minister Volker Wissing had therefore recently promised more speed with the expansion and admitted "Waiting for hours for the car to be charged is not an attractive mobility offer". Grimm also says that it should become a matter of course to be able to drive reliably with electric cars.

Politically, she believes it is particularly important that the new government under Olaf Scholz * make it clear where and to what extent the burden will be effectively relieved in return for the additional burdens - that is still unclear to many.

A first important step would be the consistent relief through the electricity price.

While Grimm is convinced that poorer households can at least compensate for the costs of CO₂ pricing in this way, critics doubt whether that will be enough.

Climate policy must not go to the disadvantage of the poorest, Veronika Grimm agrees - there are various approaches to how this should be done in practice.

* Kreiszeitung.de and merkur.de are offers from IPPEN.MEDIA.