The way public finances are raised and spent can be used as an important lever to affect various environmental problems and challenges – ranging from the Energiewende, climate protection, the management of increasingly scarce resources to the balancing of public budgets and the question how to build a form of sustainable growth. A greening of public finances can make a contribution to these challenges.

At the moment, the state is not providing sufficient incentives for environmental protection and resource conservation: environmentally harmful forms of production and consumption have benefited from up to 48 billion Euros in subsidies from the federal government according to the Federal Environmental Agency in 2010 alone. At the same time, taxes and fees on the use of resources and the environment are comparatively low and their share of total revenues has fallen since the last stage of the ecological tax reform in 2003. An ecological fiscal reform aims at using the lever of public revenues and expenditures (taxes and fees on the income side and subsidies on the expenditure side) to improve the framework conditions for a more sustainable economy and to readjust it to meet environmental goals. Reducing environmentally harmful subsidies and raising green taxes and fees will not only make it easier to meet environmental policy goals, but it can also contribute significantly to consolidating public budgets.

Against this background it is necessary to develop the existing approaches for green fiscal and budgetary policies in Germany further. The research project will work on various aspects of an ecological fiscal reform – ranging from the theoretical-conceptual foundations to the generation of relevant data as well as to practical questions of implementation.