CO2 Taxes and Duties

Abstract

The Federal Government is aiming for a reduction of the total CO2 emissions of the whole of Germany by the year 2005 of 25-30%. One of the political instruments that is to be applied for achieving this target is a CO2 duty or tax (see note at the end of this paper). But even the most basic questions regarding the design of this tax still remain a point of conflict. Furthermore it is unclear in what relationship this kind of duty is meant to be with the European combined energy/CO2 tax which since has been suggested. This paper will examine firstly a proposal of CO2 duties for the power station sector, one differentiated according to the efficiency level of the power station and to the energy source, and secondly will show the results of simulations of CO2, duties and energy taxes in models of the economy. In both cases the effectiveness (CO reduction achieved per DM tax) and the efficiency (total economic costs per t CO2 reduction) of different taxation solutions will be noted.