Energy: CO2 prices are rising - when will the climate money compensation come?

Heating and refueling become more expensive with the turn of the year - but relief from the climate money promised by the traffic light government is not in sight.

Energy: CO2 prices are rising - when will the climate money compensation come?

Heating and refueling become more expensive with the turn of the year - but relief from the climate money promised by the traffic light government is not in sight. The SPD, Greens and FDP had already agreed on the project in the coalition agreement two years ago: If the CO2 price rises for climate protection reasons, money should be put into the citizens' accounts to compensate. But given the tight budget, it is suddenly unclear whether the federal government can even afford it.

Finance Minister Christian Lindner (FDP) is responsible for the technical implementation. In his ministry, he feels he is right on schedule. It was agreed that the payment method would be created during this electoral period, said State Secretary Katja Hessel to the German Press Agency. “The mechanism is scheduled to be available by 2025.”

Long-term climate money construction site

To date, there is no way for the federal government to transfer money directly to citizens' accounts. To do this, the federal government must combine the tax identification number that everyone receives at birth with an account number. In addition, only a certain number of transfers are possible per day.

At least they want to make progress on the first problem: "It is expected that by the end of 2024, an associated IBAN will be saved for the tax identification number of all citizens who are willing to do so," says the Ministry of Finance. But that doesn't mean that climate money will then be paid out. Politically, the structure of climate money has not yet been decided, said Hessel.

The financial scope is narrow

In the end, climate money will also be a question of the funds available. Lower Saxony's Prime Minister Stephan Weil (SPD) told "Welt": "I don't know how this could be financed under the current conditions." But it is more important than ever. SPD parliamentary group deputy Matthias Miersch also sees the scope for maneuver as a result of the Federal Constitutional Court's budget ruling. The income from the CO2 price would first have to replace the now missing funds for funding programs and other measures for climate protection and the modernization of the economy, he told the Germany editorial network.

Hessel suggested a reform of the funding policy. “At the moment, all income from the CO2 price is earmarked for climate support measures or for subsidies such as funding chip factories,” she said. If you want to pay out climate money, the funding policy would have to be fundamentally changed.

SPD General Secretary Kevin Kühnert sees a hidden message in such statements. If a consequence of the Federal Constitutional Court's budget ruling is that there will be no climate money for the FDP, "then they have to say that openly," he recently warned in an interview with "Stuttgarter Zeitung" and "Stuttgarter Nachrichten".

Goal: More climate protection

The CO2 price for all fossil energy sources such as heating oil, natural gas, gasoline and diesel has existed in Germany since 2021. The consumption of these raw materials is becoming more expensive, which is intended to contribute to climate protection. Most recently, in the struggle over the federal budget, the coalition agreed that the CO2 price should rise somewhat more on January 1st than previously planned.

Climate money was originally intended to cushion the social consequences. Most recently, Economics Minister Robert Habeck (Greens) argued that citizens would be relieved because the state would cover the EEG levy on electricity prices. Almost all income from the CO2 price flows back to people. However, in the coalition agreement, the traffic light government stated that the climate money should be developed as a “social compensation mechanism beyond the abolition of the EEG levy”.

Advance by consumer advice centers: 139 euros for everyone

According to consumer advocates, Habeck's calculation doesn't add up. The total revenue from the CO2 price is significantly higher than the relief from the EEG levy, argues the Federal Association of Consumer Organizations (vzbv). Mathematically, every citizen would be entitled to climate money of 139 euros for the past three years. A family of four would have to receive 556 euros. Given Germany's current population, the federal government would have to invest around 11.76 billion euros. Budget politicians argue that there is no such leeway in the budget for next year.

Politically, the details of climate money have not yet been defined. In their 2021 election program, the Greens called for the compensation to only be paid when the CO2 price reached 60 euros per ton. We are still a long way from that. Last year, the traffic lights decided not to increase them because of the energy crisis. In order to plug the billion dollar hole after the Karlsruhe budget ruling, it should now rise from 30 directly to 45 euros per ton.

Researcher: CO2 price is too low

Economist Matthias Kalkuhl calls the increase at the turn of the year a “step in the right direction to encourage emissions savings and investments in low-CO2 technologies.” But: "In order for more citizens to say goodbye to fossil fuel heating and combustion cars, it would have to be significantly higher than what the Chancellor and the ministers are now planning," he told the German Press Agency. Kalkuhl is professor of climate change, development and economic growth at the University of Potsdam and leads a working group at the Mercator Research Institute on Global Commons and Climate Change.

Does the rising CO2 price actually bring about the desired change in behavior? There is no reliable information on this for Germany, says Kalkuhl. "However, we know from a large number of empirical studies for the EU, China and North America that the mere introduction of CO2 prices - even if the prices are initially low - has led to significant emissions reductions. We therefore assume that also in Germany's emissions have already been reduced as a result."

The higher CO2 price at the turn of the year could already have an impact on refueling and heating. But experts doubt whether this will significantly change citizens' behavior. At the gas station it costs a little more than four cents per liter, which is below the daily price fluctuations, explained the ADAC. Therefore, the effects are probably limited - especially since many people rely on cars for daily journeys and fuel prices are again below the critical threshold of two euros per liter for many.

Social explosive warning

Economist Kalkuhl still warns. "High CO2 prices contain enormous social and political explosives - if the income from the pricing is not returned to the population." The time for a concept is running out, as Germany will probably not achieve its climate goals. “Climate money will not solve all acceptance problems,” warns Kalkuhl. "But without climate money, without social compensation, a successful climate policy is hardly conceivable."

The “economic method” Monika Grimm criticized in the “Rheinische Post” that the climate money was not introduced before the increase in the CO2 price and warned the federal government to do so. "Climate money has a very positive redistributive effect - on the one hand from high to low incomes, and on the other hand from those with a high to those with a low CO2 footprint," said the member of the Advisory Council for the Assessment of Overall Economic Development.