Climate change tax reforms and incentives in Germany

1. Has your country ratified the Paris Agreement? 

Yes.

2. Has your country introduced environmental taxes?

2.1 Energy taxes

Germany introduced an energy tax on heating oil, natural gas, petrol and diesel in 1939. With the introduction of the so-called climate package at the end of 2019, the prices for heating oil, natural gas, petrol and diesel are going to increase due to the implementation of a carbon dioxide price in 2021.
Additionally, Germany has levied taxes on electricity since 1999.

2.2 Transport Taxes

Germany originally introduced the motor vehicle tax in 1906. Since 1 July 2009, all vehicles in Germany have been liable to pay a motor vehicle tax, based on engine size and carbon dioxide emissions. 

In an effort to limit air pollution, several of Germany’s major cities have also introduced environmental green zones (Umweltzonen). Every vehicle is assigned a badge (Umweltplakette) denoting how heavily polluting the vehicle is according to European emissions standards.

Furthermore, Germany levies tax on air traffic. The tax rates are going to increase on 1 April 2020.

2.3 Pollution taxes

No.

2.4 Resources taxes

No.

3. Has your country introduced a carbon tax?

Germany introduced a carbon dioxide price at the end of 2019. The carbon dioxide price will come into effect in 2021.

4. Does your country offer sustainability incentives (tax credits, subsidies or other business incentives) to encourage taxpayers to engage in behaviours and develop technologies that can impact positively the environment?

The German government encourages tax payers to buy electric vehicles by granting many subsidies to e-car or hybrid car owners. For example, the German government monetarily supports the purchase of electric and hybrid cars, privately used electric or hybrid company cars are tax-privileged and electric and hybrid car owners are not liable to pay motor vehicle tax for 5-10 years.

5. Has your country recently announced tax reforms connected to climate change? 

Germany announced the introduction of a carbon dioxide price and an increase in the air traffic tax at the end of 2019. The carbon price will come into effect in 2021 and the air traffic tax is going to increase in April 2020.

In addition, the VAT charged on train tickets was decreased by 12%.

6. Other comments

N/A

Climate change tax reforms and incentives in Germany

Dr. Heino Büsching
Rechtsanwalt, Tax Adviser | Fachanwalt für Steuerrecht (Certified lawyer for tax law)