Doug Sheridan says
This is the first fiscal deal politicians have had to negotiate after the constitutional court last month disallowed their preferred gimmick for concealing the costs of the net-zero transition….
The WSJ Editorial Board writes, Christmas came early for no one in Germany when Berlin on announced this week a new budget plan for next year.
This is the first fiscal deal politicians have had to negotiate after the constitutional court last month disallowed their preferred gimmick for concealing the costs of the net-zero transition, and it’s set to be revelatory.
Chancellor Olaf Scholz and his fractious coalition partners found themselves in a pickle after the court blew a €60B, multiyear hole in the budget. The court ruled that borrowing authority bestowed on one such fund for use in the pandemic couldn’t be re-purposed for climate matters. At least another €200 billion in borrowing-and-spending authority in another climate-related fund was jeopardized by the ruling.
For the 2024 fiscal year, starting Jan. 1, this required Scholz and his partners to find €17B in spending cuts or revenue increases. The solution has been a mix of both. The full details haven’t been released, but German media report that one loser is social welfare, which could see a reduction of several hundred millions euros in direct transfer payments. This is small in proportion to the overall budget, but an augur of trade-offs to come in the green crusade.
Also on the chopping block are some subsidies intended to shield Germans from the full direct cost of climate and other environmental policies. Berlin will no longer offset payments of a EU levy on plastics, passing the full cost onto manufacturers and ultimately consumers. The gov't also may scale back or eliminate subsidies for EVs and solar panels.
Revenue raisers could include an increase in the carbon tax to €45 per metric ton from €40. Carbon taxation is what honest gov'ts would do if they were serious about reducing emissions, but politicians resist because it saddles voters with higher direct costs.
For a typical German household, this carbon tax increase could add around €50 to the annual heating bill. Officials also are considering a new tax on aviation fuel, which will make business trips and vacations more expensive.
All of these costs are being pushed onto households so the gov't can continue subsidizing some heavy industries as planned, including chip manufacturers and steel makers under pressure to decarbonize. Good luck explaining this to voters in years to come—especially since those years are likely to feature more bruising budget battles as the court ruling continues to bite.
Our Take: Such newfound transparency about net-zero and budgets is the constitutional court’s gift to German taxpayers. It may soon provide politicians with the one tool they've yet to deploy when grappling with energy policy in a world gone mad over climate change—the truth.