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Greening the Budget

Budgetary Policies for Environmental Improvement

Edited by J. Peter Clinch, Kai Schlegelmilch, Rolf-Ulrich Sprenger and Ursula Triebswetter

Greening the Budget regards the fundamental cause of environmental degradation as government and market failure and proposes the use of budgets as an instrument of environmental policy to rectify this problem. The book focuses on the elements of the public budget which currently affect the environment and explores the scope for greening both revenue and expenditure through specific measures.
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Chapter 6: A review of environmentally damaging tax concessions in Germany

Budgetary Policies for Environmental Improvement

Ursula Triebswetter


Ursula Triebswetter 1. BACKGROUND AND POLICY CONTEXT Although an EU-wide CO2/energy tax has virtually failed, currently both the European Commission and the German government are concerned with advancing the idea of ecological tax reform by other means. In June 1996, for example, at a conference organized by the Directorates General for the Environment, the Single Market and Taxation entitled ‘Economic Incentives and Disincentives for Environmental Protection’, it was evident that the strategy of the European Commission had changed to the extent that the major reform of the energy tax was no longer being pursued but instead efforts were directed at examining and if necessary reforming the entire tax and charges system with regard to its ecological impact (Ökologische Briefe, 1996). This policy reflects the intention of the Fifth Environmental Action Programme to integrate environmental considerations into fiscal policy needs (European Commission, 1995). Strong emphasis is put on the removal of ecologically harmful tax concessions in the individual member states. The most prominent example in Europe and the world is the mineral oil tax exemption for kerosene. This means a considerable subsidy for atmospheric pollution from aircraft and at the same time a substantial income loss for governments. A variety of legal exceptions exist on the national level that encourage negative environmental effects throughout the economy. A study on the phenomenon of environmentally damaging tax concessions has been undertaken for the Federal Ministry of Economic Affairs in Germany in 1994 (Triebswetter et al., 1994). Some political parties have also begun to...

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