German government makes energy tax proposal

Environmental groups claim CO2 emissions will not fall due to planned industry exemptions

German industry will be allowed significant exemptions from new energy taxes to be introduced next year under a general tax reform proposal agreed yesterday by the government. After strong protests by industry groups and companies, the government has declared that "productive" industry will pay 20-25% of the main tax rates to be payable by commercial and domestic energy users. This is in addition to a total exemption from the taxes for energy-intensive industries already foreseen by the coalition agreement between the Social Democrat/Green governing coalition. The taxes will be levied on petrol, fuel oil and gas and electricity. In a further surprise move by the government, the electricity tax will apply to all sources, including renewable ones, although the administration is promising separate legislation to promote renewable energy. The amount of extra tax to be levied has remained the same as that agreed during coalition negotiations (ENDS Daily 19 October), despite calls from some Green parliamentarians for higher petrol price increases. The extra revenue will be used to lower payroll taxes, which the government has promised to bring down 0.8% next year. Political commentators see the government's proposal as a compromise taking into account strong pro-industry sections within the SPD and demands from within the Greens for higher taxes. Environmental groups have criticised the government's proposal as "too timid" and warn it will not be enough to achieve national goals to reduce carbon dioxide emissions. The proposal will be presented to the parliament at the end of the week.

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