Germany to Alleviate Energy Costs for Industrial Sector Amid Soaring Prices

In response to the financial burdens caused by skyrocketing energy prices due to Russia’s aggression against Ukraine, the German government has introduced a comprehensive energy pricing package. The measures, spanning the next five years, include a significant reduction in electricity taxes for all manufacturing companies, dropping to the minimum allowed by the European Union. The tax cut aims to maintain the competitiveness of energy-intensive industries, with costs for companies reduced to 50 cents per megawatt-hour or 0.05 cents per kilowatt-hour, down from over 15 euros per megawatt-hour and more than 1.5 cents per kilowatt-hour.

The reduction in electricity taxes for manufacturing companies is set to be legislatively established for 2024 and 2025, extending for an additional three years if offsetting measures are presented in the federal budget for 2026 to 2028.

Simultaneously, the existing peak compensation in emissions trading will be discontinued, with the newly agreed-upon relief surpassing the previous peak compensation. This benefits all manufacturing companies, eliminating the need for application submissions, thereby reducing bureaucratic costs for companies that previously received peak compensation.

Around 350 companies facing intense international competition are already benefiting from the Climate and Transformation Fund’s electricity price compensation. This regulation, freeing companies from CO2 emissions trading costs related to electricity production, will be extended for five more years. Additionally, the existing “Super-Cap” regulation for approximately 90 highly energy-intensive companies will continue for the next five years, supplemented by the removal of the base amount. Together, these measures relieve companies from the sums associated with emissions trading-related indirect CO2 costs.

The German government is promptly engaging with the legislature for the immediate approval of these measures, ensuring swift implementation.

The relief measures for energy prices for citizens include a 5.5 billion euro subsidy to transmission network operators for 2024, stabilizing grid fees and, consequently, electricity prices for citizens. The government has also abolished the EEG levy and extended the electricity and gas price brake until spring 2024, providing targeted relief for individuals. Approval from the EU Commission is pending for both price brakes and grid fees.

Chancellor Olaf Scholz emphasized that these measures, totaling up to twelve billion euros in relief next year alone, will offer stability and relieve companies from bureaucracy. He underscored the ongoing importance of consistently advancing the expansion of renewable energies and power grids to maintain Germany’s position. The government has initiated over 100 specific measures to expedite planning and approvals.

Federal Minister of Economics Robert Habeck praised the solution as a reliable framework supporting the competitiveness of the industrial sector, from small and medium-sized enterprises to large corporations. He highlighted the broad impact of the electricity tax reduction for the manufacturing sector, calling it a positive step.

Bundesfinanzminister Christian Lindner expressed satisfaction, stating, “With this decision, we are opting for a market-based solution with all its advantages.” The reduction in electricity tax can be realized in the federal budget and financed within the framework of the debt brake.