Climate policy through subsidies – politicians are creating the wrong incentives

2023-10-22 18:36:25

The hunt for subsidies has developed into a popular sport. Private individuals stay up late at night to get their application through when a new funding program starts before the IT platforms collapse under the weight of demand. If the budget is exhausted within a few hours, there is great dissatisfaction, as was recently the case with a program by Transport Minister Volker Wissing (FDP) for solar power for electric cars.

Companies are also at their best when it comes to receiving the highest possible government subsidies for the construction of new factories. Different locations and their commitments are played off against each other. Construction takes place where the most money is attracted.

Subsidies can help – but

Subsidies are not inherently objectionable. They help governments, citizens and companies steer in the desired direction. But in its efforts to get the economy and society on the path to climate neutrality as quickly as possible, the traffic light coalition has recently lost sight of important questions: Which technologies and products are already economical today, even without subsidies? For which ones will this possibly never be the case? The key question should always be whether taxpayers’ money would be better invested elsewhere.

Corinna Budras and Julia Löhr, Berlin Published/Updated: , Recommendations: 4 Corinna Budras and and Jannik Müller Published/Updated: , Recommendations: 118 Julia Löhr, Berlin Published/Updated: , Recommendations: 20

The billions from the climate and transformation fund for the construction of chip factories should only slightly reduce Germany’s dependence on imports. These factories still have to source many of the raw materials or intermediate products they need from countries like China. In addition, production in a location as expensive as Germany drives up the prices of products for end customers. The SPD and the Greens like to ignore this aspect because it does not fit their social standards.

And then there are the deadweight effects. Most private households that own both a property and an electric car could probably pay for a solar-powered charging station without government support. But which politician likes to say that when his party’s poll numbers are in the basement?