The German government appears poised to adopt a new multibillion-euro subsidy program to compensate industries for high energy costs, although details of how such a plan would work and be financed remain unclear.
Berlin is “working intensively” on a potential solution to design such an energy subsidy, Steffen Hebestreit, spokesman for German Chancellor Olaf Scholz, told reporters on Friday. On Monday, a government spokesperson said “various proposals” were “being examined and carefully weighed” as part of ongoing discussions between the chancellery and the economy and finance ministries.
Previously, the chancellery had ruled out such a subsidy program, partly because such a measure could conflict with EU rules that limit state aid to industry. But given Germany’s recent economic stagnation, the government is under increasing pressure to strengthen the country’s industrial infrastructure.
Economy Minister Robert Habeck has been advocating for such a system of energy subsidies for months, arguing that German industry will face five difficult years before the transition to renewable energy takes off. its fruits. The Greens’ top politician has warned that without state support “we will no longer have an industry” as companies will move their activities to countries like France or the United States, where Energy prices are much lower.
Chancellor Olaf Scholz had resisted Habeck’s spending efforts. But in an interview with Welt am Sonntag published on Sunday, Scholz said he was no longer opposed to the project. At the same time, he warned that his government must “assess such market intervention very carefully.”
The Commission recently warned that it will not continue to turn a blind eye to subsidy programs that distort market conditions and violate EU law. Brussels provided exceptions to these rules after Russia’s invasion of Ukraine, but these exceptions will expire at the end of this year.
Still, senior German and French officials told POLITICO that a potential deal could see Paris and Berlin press Brussels to grant another exemption, as energy prices remain higher than usual. before the start of the war.
Andreas Rimkus, an MP from Scholz’s Social Democratic Party specializing in energy policy, told POLITICO that high electricity costs have “become a brake on industrial transformation.” He urged Scholz to “move forward boldly now” with the energy price subsidy and added: “International competition for business locations is in full swing, and it will not wait.”
One German proposal is to cut taxes for energy-intensive industries, while another possibility would be to use an existing price subsidy introduced a decade ago. This subsidy covers some of the costs industries face under the EU emissions trading scheme, but it could potentially be expanded.
The German plans are controversial as Berlin already introduced a massive 200 billion euro plan last year to lower energy prices for consumers and businesses – although the extent to which large Energy-intensive industries can use this money is limited. Only about a quarter of that money has been paid out.
Nevertheless, last year, Germany accounted for 53 percent of the EU’s overall spending of 672 billion euros on public subsidies. A new energy subsidy would likely spark criticism that Germany would undermine fair competition within the EU’s single market.