2023-11-09 19:29:19
Industry first. The German government has decided. At the pressing request of employers and unions, he presented, Thursday, November 9, a vast subsidy plan to reduce the price of electricity paid by his companies. The main measures are planned until 2025, but could be extended until 2028, for a bill estimated at 28 billion euros over the entire period.
This plan, which will cost “up to 12 billion euros” next year alone, plans in particular to “considerably reduce the electricity tax” for the manufacturing sector, reducing it from 1.537 cents per kWh to the European minimum of 0.05 cents per kWh. The State will also cover part of the fees paid by manufacturers to electricity network managers.
Restoring competitiveness
The companies that consume the most energy, those in the chemicals or steel industry for example, which are “facing the most international competition”will also benefit from the extension ” for five years “ mechanisms to offset part of their costs for the purchase of carbon quotas, when they exceed the authorized ceilings. In total, 350 companies would be affected.
“The government is massively relieving the manufacturing industry of its electricity costs”, welcomed Chancellor Olaf Scholz, in a press release. Employers welcomed the plan, saying that it “ constitutes an important step towards greater competitiveness”. On the other hand, the unions are more critical, because they would have preferred a price cap.
Bad news for the climate
It is not certain, in any case, that these announcements help Germany to respect its climate commitments, while 45% of its electricity comes from fossil fuels, including almost a third from coal, despite a acceleration in renewables. Its carbon content was thus 318 g of CO2 per KWh, Thursday November 9 at 1 p.m., according to the website electricitymaps.com, compared to 43 g of CO2 per KWh in France – which benefits from nuclear power.
At the beginning of November, the Minister of Finance, Christian Lindner, also considered unrealistic on Wednesday the government’s objective of bringing forward the closure of coal-fired power plants to 2030, instead of 2038.
Economic recession expected this year
In recent months, the situation has worsened for German industry, which had become accustomed to cheap Russian gas. The chemist BASF, the largest consumer of energy across the Rhine, is increasing its losses and savings plans, while raising the specter of a relocation of part of its activities.
“It is becoming almost impossible to make ammonia in Germany, given the costs, and most chemists have plans to produce elsewhere. These could be activated when the market recovers”underlines a French industrialist who knows the subject well.
Germany is expected to be the only G7 country to be in recession this year, according to the IMF, which forecasts a GDP decline of 0.5%. The government, for its part, expects a contraction of 0.4%. This is why the Minister of the Economy, the ecologist Robert Habeck, has been calling for several weeks for the establishment of a cap on electricity prices.
But the two other member parties of the coalition, in particular the liberal FDP, criticized this solution because of its cost for the taxpayer. Chancellor Olaf Scholz, on the other hand, pleaded for a compromise, which will ultimately have been found.
The return of state aid
The German strategy of heavily subsidized electricity for large companies should not be well received by the European Commission, guardian of free competition and great critic of state aid. Since the pandemic and the war in Ukraine, however, she has learned to put water in her wine on the subject.
Others do not hesitate to publicly express their criticism. This is the case of the International Monetary Fund. “We recommend against subsidizing electricity for the manufacturing industry in Germany. It won’t be money well spent. It will raise electricity prices for those who do not benefit from the subsidy scheme, it will subsidize the fossil fuels that we want to do without. Finally, it will delay a transformation (of the German energy system) which must take place”explained Alfred Kammer, the (German!) Director of the IMF for Europe, Wednesday November 8.
But the fact that France also chooses to support its companies with low electricity prices, within the framework of the new regulatory contract signed with EDF, shows the extent to which large states have chosen to regain control of the subject.
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