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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 7: Energy Subsidies in Germany

Budgetary Policies for Environmental Improvement

Bettina Meyer


1 Bettina Meyer 1. INTRODUCTION In this contribution the aim is to analyse distortions within one economic sector (the energy sector) in Germany. The main questions are: Which energy sources are favoured and which are handicapped by public policy? What is the additional fiscal potential of reforming energy subsidies? What are the environmental impacts of energy subsidy reform? For this purpose it is useful to choose a broad definition of subsidies.2 The next section, Section 2, deals with the more specific question of tax exemptions within German energy taxation, in particular the mineral oil tax. The term ‘exemptions’ is used broadly to cover all deviations of the actual energy taxation from a system of reference tax rates. In the third section the categories of broadly defined energy subsidies are presented and some estimates are given. Section 4 offers some concluding remarks. Definition of Subsidies There is no general and legal definition of subsidies, so any examination of subsidies must start with a definition. Subsidies can be characterised by the following features: 1. Subsidies result from measures of the public authorities (European Union, federal, state and local governments) or public firms and institutions (for example public law foundations, public electricity suppliers). The activities of private energy suppliers, foundations, associations, other institutions, firms and households, by contrast are not considered as subsidies,3 but are interpreted as private economic decisions. The only exception is when private institutions are forced by public measures to support certain energy sources. This is the case, for...

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