Zeitschrift für Energiewirtschaft

Germany is among the first Member States of the European Union that introduces a separate emissions trading system (ETS) in two of those sectors that are not integrated in the EU ETS so far. It is legally stipulated that until 2021, such a national ETS will be established in Germany’s transport and housing sector. Yet, contrary to the EU ETS, prices for carbon dioxide (CO2) emission certificates will be fixed in the first five years, that is from 2021 to 2025, starting with a price of 25 euros per ton that will increase to 55 euros in 2025. This climate policy instrument will steadily rise the energy cost burden of both households and firms. A promising approach to conserve the currently high acceptance for a carbon pricing in Germany would be to entirely reallocate the resulting revenues to the consumers. This article discusses three alternatives to reallocate the revenues originating from this national carbon pricing: a) a lump-sum per-capita reallocation to private households, b) the reduction of electricity prices due to (i) decreasing the electricity tax to EU minimum tax rates and (ii) the financing of the industry exemptions in the surcharge for the promotion of green electricity by taxes, rather than a higher surcharge for all other consumers, as well as c) targeted financial aids for particularly burdened consumers, for example by increasing the housing benefits of poor households. Most effective with respect to alleviating the burden of poor households would be the third alternative. While raising housing benefits would not require large amounts of money, the remaining CO2 revenues could preferably be employed to reduce Germany’s electricity tax, as this tax is increasingly becoming obsolete from an ecological perspective. Although there are good reasons for both a per-capita reallocation and a reduction of electricity prices, diminishing the electricity tax has several advantages over a per-capita reallocation, particularly with respect to the transaction costs of reallocation, which would be negligible in case of tax cuts.