Merkel preparing to drop nuclear tax in deal with industry: report

The government is planning an informal deal with energy companies, dropping the fuel element tax in return for cooperation in Germany’s switch-off from nuclear power, according to government sources.

Merkel preparing to drop nuclear tax in deal with industry: report
Photo: DPA

“Everything is moving towards scrapping [the tax],” a source in the coalition told Wednesday’s Financial Times Deutschland, which reported that a senior government representative had said the same.

The Finance Ministry, which as recently as April had been checking the chances of increasing the tax, told the paper that talks were still ongoing.

Finance Minister Wolfgang Schäuble has always blocked any suggestion of taking a fiscal hit in connection with energy policy.

Although the law providing for the tax was implemented at the start of the year, payment is only due when the fuel elements are swapped – something currently being undertaken at the EON power station Grafenheinfeld.

EON refused to comment Financial Times Deutschland due to the fact that it has kept the option of suing against the tax, open.

Although the dropping of the tax is likely to be portrayed as being the only way the energy industry can or will invest in other sources of energy, the paper suggests it would be an unspoken deal.

This would see the industry accepting the reduced running time of their nuclear power stations without suing. A number of modern gas-fired generating stations will have to be built in Germany to enable the nuclear switch-off, the paper noted.

“The coalition is, however, risking its credibility with the tax waiver,” the paper wrote.

The reasoning will be that the tax was calculated in relation to the profits expected from the full running-times of the 17 German nuclear power stations, which will be reduced when they are closed down early. “However, the government only last autumn put great import on the idea that these had nothing to do with each other,” the paper said.

The legal basis for the tax said the anticipated €2.3 billion it would raise was to pay for the work needed on the nuclear waste storage site Asse. Even without the eight oldest nuclear power stations which are currently offline and not expected to be turned on again, the tax should raise €1.5 billion.

The idea was for the tax to be separate from electricity prices, hitting only the profits of the energy companies, which have been campaigning against it for months, the paper said.

Chancellor Angela Merkel indicated she might soften two weeks ago when she told the weekly paper Die Zeit that their situation, “was not so exorbitantly good that they can take any burden.”

Social Democratic Party chairman Sigmar Gabriel accused Merkel of preparing to strike a deal with the energy industry only last week. He was focussing not on the fuel element tax, but on the safety standards being used to decide whether nuclear power stations could continue to operate. He said the safety commission currently checking them was not doing a thorough job.

The Local/hc

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German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.