Failure to adequately price pollution and invest in clean energy is a key factor in both climate breakdown and social inequality. We must fix the way public money is used.
Our tax system is broken, rewarding polluters and incentivising the use of fossil fuels at the expense of renewables. Through public spending and tax breaks, governments continue to support industries that are responsible for the climate crisis. The International Monetary Fund estimates that in 2015 EU governments spent over €260 on oil, gas and coal, including direct subsidies, tax reductions and the cost of negative externalities such as climate-related hazards and air pollution deaths or illnesses. In Germany, this cost almost €800 per person at the end of the year.
More efficient fossil fuel pricing in 2015 would have lowered global carbon emissions by 28% and air pollution deaths by 46%, according to experts. It would have also allowed governments to redirect spending towards critical areas such as clean energy, health, education or social services.
From plastic pollution to air quality and climate change, a fairer tax system and more responsible public spending can discourage harmful behaviour. But this only tells half the story. The EEB believes that taxing polluters must be accompanied by a decrease in other taxes such as labour or by a more equitable redistribution of revenues. This would ensure that everyone reaps the benefits of the transition to a cleaner and better world.
The EEB has recently taken over the work carried out so far by Green Budget Europe, an expert platform promoting environmental fiscal reform through a network of eminent academics and influential economists.
Greening the EU budget
The revision of the EU budget – known as the ‘Multiannual Financial Framework’ – provides an important opportunity to boost climate action.
The EEB is pushing to increase the money available in the EU budget to address the climate crisis from the current 20% to at least 40% of the new budget – that means from the current €206 billion to €320 billion for 2021-2027.
Policymakers must agree to redirect investments towards clean energy, transport, agriculture and business models. This means no more gifts to industries that are destroying the planet, and more investments in clean solutions and support for regions that still rely on fossil fuels.