Climate deal: Grand Coalition to fast-track relevant laws before year end

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The cabinet has decided on the first laws for the implementation of the government’s climate deal – including cheaper train tickets. Plans for a higher flight tax were criticized by the aviation industry as a distortion of competition in Europe.

By Christmas, the federal government intends on having passed into law all relevant measures for its climate deal package. According to the dpa (german press agency), this plan will be made possible by a shortened procedure in the Bundestag and Bundesrat. Thus, the package would not only be presented to the Bundestag, but also to the upper chamber and, if necessary, to the mediation committee of the Bundestag and Bundesrat.

This morning, two essential pieces of the climate package were brought forward as part of a bill by the Ministry of Finance on tax law

Train tickets: Train tickets are to become cheaper so that more citizens can switch from cars to trains. To this end, VAT on long-distance tickets is to be reduced from 19 to seven percent. The state will lose 500 million euros due to the lower tax rate.

Plane tickets: In order to compensate for the reduced income due to rail taxation, the federal government intends to raise taxes on airline tickets. According to the latest draft by the Ministry of Finance, the air traffic tax for domestic and EU flights is to be raised by around 76 percent, and for longer flights by around 43 percent. The Ministry of Finance expects this to increase revenue by 740 million euros per year. Specifically, the tax for flights in Europe is to rise by 5.65 euros to 13.03 euros per ticket departing from a German airport. For routes up to 6000 kilometers, an increase of 9.96 euros to 33.01 euros is planned. For further long-haul routes, 59.43 euros will be due in the future, almost 18 euros more than before. The change is planned for 1 April 2020.

CO2 price: The bill is not yet ready, but the cabinet already decided on the key points for the planned CO2 price. It is intended to make climate-damaging fuels from oil, natural gas and later coal more expensive – and thus provide an incentive for the development and purchase of climate-friendly cars and heating systems. From 2021, a fixed entry price of ten euros per tonne of CO2 emitted will initially apply to emissions in the transport and construction sectors, rising to 35 euros by 2025. After that, there will be a national emissions trading scheme for these sectors with an initial price range of between 35 and 60 euros.

Commuter allowance: In order to compensate for the more expensive fuel, the commuter allowance for long distances is to increase for five years. From the 21st kilometre onwards it will be 35 cents per kilometre instead of 30. This amount can be deducted from taxable income per working day.

Building insulation: Those who insulate walls or roofs in their condominium or house, renew windows, doors or heating, should receive tax incentives for three years. The property must be older than ten years. According to dpa information, the subsidy is to be deducted from the tax liability up to a total volume of 200,000 euros as a tax reduction of up to 20 percent. A total subsidy of 40,000 euros distributed over three years is thus possible.

Aviation industry sees distortion of competition

The German aviation industry has sharply criticized the plans of the German government. “The increase of the air traffic tax in this national solo effort massively intensifies the distortion of competition to the detriment of the German airlines and airports”, explained the Federal Association of the German Aviation Industry (BDL). This would constitute a weakening of the industry’s ability to invest.

The BDL complained that the tax is to be increased disproportionately on flights to European destinations. There, European and domestic air traffic is already fully included in emissions trading. In addition, according th the BDL, the federal government is violating the clearly formulated goal of the coalition agreement between CDU, CSU and SPD to “relieve our airports and aviation companies of unilateral national costs”.

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