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ICYMI: Germany floats subsidies for energy-intensive industries (POLITICO)


BERLIN — Germany’s Economy and Climate Minister Robert Habeck on Friday proposed a plan to subsidize electricity costs for struggling energy-intensive industries, hinting at support for EU joint debt to fund the measure bloc-wide if necessary.

In a working paper, Habeck’s ministry suggested reimbursing energy-intensive companies for 80 percent of their costs whenever power prices — based on average electricity rates — rise above 6 cents per kilowatt-hour.

The measure would last until 2030 and could cost up to €30 billion, financed by funds earmarked for Germany’s post-pandemic recovery.

The plan is aimed at helping industries like chemicals, steel, glass and paper hammered by soaring energy prices in part spurred by Russia’s invasion of Ukraine, as well as responding to competition from China and ensuring companies don’t decamp to places with cheaper energy like the U.S.

“The energy price shock acutely threatens Germany’s prosperity and its strong industrial base,” Habeck said.

The Green Party politician said that in the longer-term, he wants heavy industry to get cheap electricity from renewables financed by special government-backed subsidy schemes and long-term contracts between generators and industry. That’s the same approach favored by the EU in its electricity market reform proposal.

But in the meantime, “we cannot wait for the long-term measures to take effect,” Habeck said, creating the need for a “bridge electricity price” to “secure the competitiveness of energy-intensive companies” as long as they commit to climate neutrality by 2045.

That’s likely to upset EU countries with less fiscal firepower which last year slammed Berlin’s €200 billion energy subsidy package they said risked the integrity of the bloc’s internal market.

Habeck’s ministry said it was “aware” of such concerns and added it would seek a “constructive exchange” with the European Commission to discuss whether “favorable loans could be made available to the member states concerned in order to finance temporary support for energy-intensive companies.”

That could be modeled on the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE), the paper said, a scheme rolled out by the EU to support workers during the pandemic.

Habeck will have to get the proposal past his coalition partners, with both Chancellor Olaf Scholz and Finance Minister Christian Lindner expressing skepticism in recent days over forking out more subsidies to prop up Germany’s industry.

A finance ministry spokesperson on Friday said there were “no funds available for this project.” In Lindner’s view, it’s also not possible to reallocate resources from the crisis fund.

Gabriel Rinaldi reported from Berlin.

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