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German Industry's Energy Loophole Under Scrutiny


Germany’s rapid renewables expansion has been made possible by extensive government support. Berlin paid for these green subsidies by levying a renewables tax on consumers, which has raised the cost of electricity for households and industries alike. Concerned about the effect such costs might have on the competitiveness of its much vaunted heavy industry, Germany exempted more than 2,000 energy-hogging firms from the tax (though German families and small businesses received no such reprieve). Now, as Reuters reports, the EU is looking into these exemptions to see whether or not they violate the bloc’s competition rules:

Germany collects surcharges from power users to help fund operators of solar and wind power installations. Heavy electricity users such as cement, steel and some chemical plants are exempt to keep them from being priced out of the global market.

Brussels believes this could distort competition….

[Minister-President of North Rhine-Westphalia Hannelore Kraft] and Environment minister Peter Altmaier, who are leading the negotiations on a new German government’s energy policies, are due to travel to Brussels on Thursday to meet with [EU Competition Commissioner Joaquin Almunia] and discuss the matter.

We saw rumblings of this back in July, but the probe never materialized. Still, Germany’s political class is taking the threat of EU action seriously, likely because it knows it has some very shaky legs to stand on.

It’s important to remember that this problem is entirely of Germany’s own making. By propping up energy sources incapable of competing on their own, it created an economically unsustainable (though more environmentally sustainable) energy mix. German businesses are already moving to countries with lower energy prices—countries like shale-rich America. If the EU decides, as it probably should, that Germany is unfairly aiding its domestic industry by exempting it from the country’s green tax, then this problem will get a whole lot worse. And, with Germany driving Europe’s recovery, a threat to German industry is a threat to the continent. What a mess.

[Angela Merkel image courtesy of Wikimedia]

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  • Kevin

    I don’t see why this is an EU level issue. Germany effectively passed a tax on domestic industry (and consumers) but exempted some of it. No other EU firm is in a worse position because of this law. Germany did not subsidize its industry or apply a tax to foreigners that it waived domestically. All it is doing is giving a break from the tax, which does not apply to foreigners, to some domestic interests but not others. I think the EU is overreaching and its position is very weak.

    • Pete

      Good point, Kevin.

    • Andrew Allison

      First, there is nothing which Brussels doesn’t think it should regulate, and second, there are restrictions on government subsidies to businesses which compete with other EU companies.

      • Kevin

        I agree about Brussels’ attitude, but this is not a subsidy. It is not even excluding German industry from a tax or regulation applied to foreign competitors. Rather it is merely not imposing additional taxes on German industry. (Taxes which foreign competitors are also excluded from.). EU regulations, as crazy as they may be, can’t demand that Germany impose taxes on its own industry that are not imposed on foreign firms.

        • Andrew Allison

          Not quite. It is selectively exempting specific industries for competitive advantage.

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