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Germany's Great Green Meltdown
Germany's Green Policies Breaking the Bank, Maybe the Rules

It’s official: the EU is investigating Germany’s green policies to determine if they violate the bloc’s competition rules. On Wednesday the European Commission announced it was opening a probe of Merkel’s policy of exempting her country’s most energy-intensive firms from green surcharges tacked on to electricity bills to subsidize the cost of expensive renewables.

How did we get here? Well, in the wake of the Fukushima disaster, Germany embarked on its “turn” towards green energy—its energiewende—as it looked to replace its nuclear reactors with solar and wind farms. By guaranteeing solar and wind energy producers high rates for their efforts, Berlin was able to kick-start its renewables industry, but the success came with a very high price tag, and the costs were passed along to consumers. To protect its much-vaunted heavy industry, Germany exempted some of its power-hungry companies from this green surcharge, and that got Brussels’ attention. The FT reports:

“The reductions seem to give the beneficiaries a selective advantage that is likely to distort competition within the EU internal market,” the commission said. “The current state aid guidelines do not foresee the possibility of such reductions.”

Merkel’s response was defiant:

“We will make it very clear to the [European] Commission, Germany wishes to retain a strong industrial base. We will make it clear that Europe is not strengthened when jobs in Germany are threatened,” she said in combative remarks to the Bundestag.

The EU will have to decide whether or not these exemptions violate any rules, but that issue aside, Germany’s green policies are past due for a rethink. The burden of ever-rising electricity prices can’t be borne by German businesses and households forever.

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  • free_agent

    You write, “The burden of ever-rising electricity prices can’t be borne by German businesses and households forever.”

    But they can, as long as they don’t compete with imports. As long as people are unwilling to move between countries inside the EU, households won’t be driven out by higher energy costs, and businesses in non-tradable sectors are similarly protected. It becomes just a “green tax” that has to be paid.

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