The economist and IWH's Deputy President, Oliver Holtemöller, criticizes the federal government's budget agreement for neglecting social balance in the proposed increase of CO2 prices. Holtemöller, a professor of economics, believes that such an economic strategy should include a social compensation, effectively returning revenue generated from carbon pricing to citizens and businesses in the form of 'climate money'. This crucial component is missing from the package as of now, he states [1].
Holtemöller describes the significance of carbon pricing in achieving climate protection targets efficiently. It's a recommendation long endorsed by economists, but it's crucial to ensure a social balance as well. Though, the recent budget agreement does not include this feature [1].
The discussion on the impact of increased CO2 prices on household budgets is a pressing concern among local politicians in Saxony-Anhalt, raising questions about social equalization [2]. Moreover, an economic research report indicates that the rise in CO2 prices will lead to higher household costs, involving items like energy-intensive household cleaning products [3].
However, Holtemöller proposes that the revenue generated through carbon pricing be returned to citizens and businesses as a form of 'climate money'. This would help lower the expenses associated with the CO2 price hike [3]. The government has yet to outline plans for including such a social compensation mechanism in the agreement, causing concern among experts such as Holtemöller and household advocates [3].
Holtemöller emphasized this need for considering societal implications during an MDR interview, stressing the importance of safeguarding lower-income households and small businesses in regions like Saxony-Anhalt [4].
For balancing the social impact of the CO2 price rise, several measures can be taken: selectively supporting low-income households with targeted subsidies, grants, or low-interest loans; instituting a 'climate bonus' compensation scheme; providing infrastructure support for transitioning to renewable energy alternatives and energy-efficient appliances; implementing progressive pricing mechanisms based on household income; and promoting energy efficiency measures through public education and incentives [5].
[Sources:] [1] [2] [3] [4] [5] [enrichment data added by text generator]
