Maintaining control and acceptance
The rising costs of climate protection due to the pricing of climate-damaging CO2 emissions – in short: CO2 pricing – are a considerable burden for private households and businesses. The triple climate bonus returns the funds received by the Climate and Transformation Fund (KTF) through CO2 pricing to private households and businesses.
On the one hand, the design must provide noticeable relief for private households and businesses. This applies in particular to those who are particularly burdened by CO2 pricing. On the other hand, the measure must be transparent enough that the return of funds is visible to everyone and CO2 pricing is accepted even when prices rise. To this end, the measure must not undermine the steering effect of CO2 pricing.
The triple climate bonus is therefore more targeted than a uniform refund to all citizens. It consists of three pillars:
- Broad tax relief for individuals and businesses.
- Targeted support for particularly vulnerable groups.
- Investments in climate-friendly infrastructure that benefits everyone.
Pillar 1: Broad relief for businesses and private households
The first pillar of the triple climate bonus is a broad tax break for both households and businesses. A mix of different breaks makes sure that households and businesses both get the same benefits.
Lowering the electricity tax and grid fees directly cuts the price of electricity. Unlike energy-intensive industries, small and medium-sized enterprises (SMEs) in particular have not received any special discounts on electricity prices to date. This will strengthen Germany's competitiveness as a business location and preserve jobs.1 The future coalition's plans to reduce the electricity tax to the European minimum and to reduce levies and grid fees 2 are therefore to be welcomed.
Another key element is the redistribution of revenue from CO2 pricing through a reduction in income and capital gains taxes. This increases the disposable income of households with employed members and has a positive effect on employment, investment and thus on value creation (GDP). 3 The coalition plans to reduce income tax for small and medium incomes in the middle of the legislative period.
These tax cuts can be designed in such a way that they are financed from the revenues from the CO2 levy and thus do not require additional budgetary resources. Because revenues from CO2 pricing will decline in the medium term due to lower-emission technologies and changes in consumer behaviour, the adjustment of tax rates must be considered from the outset. This is the only way to ensure revenue neutrality in the long term. Acceptance of CO2 pricing will be maintained by clearly identifying tax cuts as a climate bonus.
Pillar 2: Targeted support for hardship cases without excessive bureaucracy
The second pillar of the triple climate bonus is targeted support for hardship cases. In the interests of social cohesion, climate protection measures must not lead to an exacerbation of inequalities. Targeted support already exists for companies in certain sectors, but certain private households also need targeted support.
Different groups of people are particularly affected. This applies to households with generally challenging income situations (e.g. people with disabilities or single parents), but also to those who are particularly affected by CO2 pricing, including commuters. Instead of introducing a new climate allowance for these groups, which would entail high administrative costs, existing support instruments such as housing benefit, heating subsidies, child benefit and commuter allowances will be permanently supplemented with appropriate climate surcharges.
In its coalition agreement, the black-red coalition has provided for socially graded relief and subsidies for housing and mobility 4, which can have this effect if implemented in the appropriate manner.
Pillar 3: Infrastructure investments
Part of the revenue from CO2 pricing goes towards improving public infrastructure. This is the third pillar of the triple climate bonus. Climate-friendly transport routes, such as the rail network, local public transport (LPT), especially in small towns and rural areas, but also energy infrastructure, such as heating and electricity networks, electricity storage capacities and energy efficiency measures, receive targeted support from the revenue generated by the CO2 levy.
These measures will ease the financial burden in the medium term and are also widely accepted by all sections of the population, as they benefit society as a whole. 5 The planned investments from the special fund in the comprehensive renovation and expansion of infrastructure open up opportunities here.
Acceptance through transparency
In order for the CO2 levy to be accepted, it is essential to communicate the link between CO2 pricing and the triple climate bonus measures in a comprehensible manner.
CO2 pricing shows consumers the social costs of CO2 emissions. This is part of honest, transparent communication with responsible citizens. Visibility goes hand in hand with the opportunity to reduce climate-damaging consequences of consumption and thus save costs directly. This control function for households and businesses is the key to efficient climate protection.
However, CO2 pricing is not an additional source of revenue for the state. The funds are returned directly to the people through the triple climate bonus and used for social compensation. There is much to suggest that a high percentage of the population would then also be willing to support appropriate measures.
The use of the funds is of great importance for the assessment of the measure by the population. 6 The fact that there are only limited possibilities to explain the connection between CO2 pricing, the resulting revenues and their redistribution to the population in an understandable way should be taken into account both in the design of the measures and in political communication. The infrastructure package that has been agreed upon can give the new government some leeway here.
CO2 price-financed tax relief, hardship compensation and infrastructure investments – for prosperity and justice
Just as Germany, as a leading economic nation, must convince the international community of its transformation to climate neutrality and be able to connect with it, this persuasiveness must be achieved even more so among the general population here in Germany. This must apply not only to the result (climate neutrality), but also to the path to achieving it, especially since it is a long one and certain changes are inevitable that will affect different population groups to varying degrees.
The triple climate bonus achieves this with a combination of tax relief, compensation payments for hardship cases and infrastructure investments. The measures are financed from the revenues from CO2 pricing, which flow into the KTF. For CO2 pricing to be accepted, the level of information about it and about emissions trading systems, border adjustment mechanisms and their impact on climate protection must be improved. However, the key remains the redistribution of the funds collected. It must be made clear that citizens personally, as well as companies, benefit financially from these climate protection instruments.
The measures of the triple climate bonus are recognisable to the beneficiaries and do not require any new bureaucratic processes. Implementing these measures as relief measures for everyone on the one hand and specifically for those particularly affected on the other is in line with the basic principles of the social market economy for a society based on personal responsibility and solidarity. Applying these principles to climate protection is important for prosperity and justice.
1 Frondel, Manuel / Schmidt, Christoph M. (2024), Rückverteilung der Einnahmen aus der CO2-Bepreisung. RWI-Positionen #83, 07.02.2024. https://www.rwi-essen.de/fileadmin/user_upload/RWI/Publikationen/RWI_Positionen/RWI_Pos_rueckverteilung_der_Einnahmen_aus_der_co2_bepreisung.pdf [last access: 26.09.2024].
2 Verantwortung für Deutschland, Koalitionsvertrag zwischen CDU, CSU und SPD, 21. Legislaturperiode, 957 f. [last access: 25.04.2025].
3 Kopernikus / Kalkuhl et al. (2024), Optionen zur Verwendung der Einnahmen aus der CO2-Bepreisung. Potsdam: Kopernikus-Projekt Ariadne. https://www.kopernikus-projekte.de/lw_resource/datapool/systemfiles/elements/files/F7E055A6F1A226B0E0537E695E86E851/live/document/Ariadne-Kurzdossier_Rueckerstattungsoptionen_Maerz2023.pdf [last access: 26.09.2024].
4 Verantwortung für Deutschland, Koalitionsvertrag zwischen CDU, CSU und SPD, 21. Legislaturperiode, 928-930 [last access: 25.04.2025].
5 Sozial-Klimarat (2024), Auf dem Weg zu einem klimapolitischen Lagebild. Persona-Studie. https://www.sozial-klimarat.de/post/auf-dem-weg-zu-einem-klimapolitischen-lagebild [last access: 26.09.2024].
6 Adelphi (2022), Akzeptanz und Kommunikation eines CO2-Bepreisungssystems. https://adelphi.de/de/publikationen/akzeptanz-und-kommunikation-eines-co2-bepreisungssystems [last access: 26.09.2024].
