Germany faces fiscal strain from electromobility and climate-harmful subsidies

Germany is facing significant fiscal and environmental challenges as the transition to electromobility and existing subsidy structures impact the national budget. The rise in electric vehicle adoption, driven by increasing fossil fuel prices, is reducing tax revenue from diesel and gasoline. Experts from the Kiel Institute for the World Economy warn that without fiscal reforms, the road system could become a deficit-inducing business for the state. Energy tax revenue is projected to drop from 33 billion euros in 2025 to just 5 billion euros by 2050.

Simultaneously, a report by Green Budget Germany (FÖS) reveals that the country allocated approximately 66 billion euros to climate-harmful subsidies in 2024. These subsidies, spanning the transport, energy, industry, and agriculture sectors, remain largely unchanged since 2018. Nearly half of these funds are directed toward the transport sector, including tax reductions for diesel, kerosene, and company vehicles. Environmental organizations and the Federal Environment Agency have called for reforms, noting that high energy prices have actually increased demands for new subsidies.