Tax dispute freezes Germany's climate plans

A general view shows demonstrators as they gather with placards at Brandenburg Gate during a protest called by the Fridays for Future movement for climate protection. AFP

Germany's preparations for next week's UN climate conference in Madrid were dealt a blow on Friday when parts of the government's ambitious plans for climate policy reform were blocked by parliament.

The government's "climate package", a collection of four bills with policies including increases to the cost of air travel and the introduction of a carbon pricing system, was supposed to come into force at the beginning of next year.

Yet it hit the rocks in the upper house of the German parliament amid fears over financing and criticisms that it did not go far enough.

Representatives from Germany's federal states rejected proposals for a series of tax reforms, including a reduction in VAT on train tickets and temporary tax exemptions for the restoration of buildings.

Amid fears that the federal states would have to make up the lost revenues themselves, the upper house refused to pass the bill, which will now be subject to negotiations between the two chambers.

Other elements of the climate package were passed successfully on Friday.

A surcharge on plane journeys of up to 2500 kilometres (1,500 miles) will be hiked by 74 per cent to 13 euros ($14), while for longer journeys it will be raised to up to 60 euros.

The carbon tax, which would later be incorporated into an EU emissions trading system, was also passed despite opposition from the Green party, who considered it to be too low.

The defeat is a setback for Chancellor Angela Merkel's government ahead of the COP25 conference in Madrid starting Monday and came on a day when thousands took part in climate protests and strikes in cities across Germany.

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