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]