An aggressive national climate strategy does not come without significant costs. The German government has been attempting to mitigate those costs where possible, but now finds itself in the midst of a budget crisis that cost the country its electric car subsidy. However, recent reporting from Zeit Online through Clean Energy Wire reveals that the country is attempting to mitigate the costs to citizens of the carbon transition by using revenues from CO2 trading. The government is working on a “climate bonus” to help its residents cope with rising costs associated with cutting down on CO2 which must be implemented by 2027, when the EU ETS enters its second phase. The article describes the climate bonus stating:
“The government in its coalition treaty agreed to ‘develop a compensation mechanism’ called Klimageld to compensate for rising carbon prices. The two main issues are setting up a mechanism to distribute the money, and making sure that the CO2 price revenues are actually available and not used for other climate measures.”
Creating and implementing this program is not without its challenges. The article points out that such a program is unprecedented in Germany and that there is no existing database of German citizen bank information, making it difficult to build the infrastructure to deliver climate bonuses.
Germany’s climate bonus is an innovation for alleviating burdens the transition will have on the general public, hopefully ensuring continued public support for climate initiatives. It is unlikely the strategy of direct payments to citizens will catch on, however. We are more likely to see tax cuts, subsidies and other incentives reflective of typical governmental mechanisms. Don’t expect a check in your mailbox anytime soon.
If you aren’t already subscribed to our complimentary ESG blog, sign up here: https://practicalesg.com/subscribe/ for daily updates delivered right to you.