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How Germany plans to help households cope with rising costs

Germany's traffic-light coalition is meeting today to discuss how to ease the burden of higher energy costs on consumers - with lower-income earners likely to benefit the most. Here's an overview of what they're discussing.

Cables in a plug socket
Several electronic devices plugged into an adapter. Photo: picture alliance/dpa | Hauke-Christian Dittrich

German households have been hit hard by the impact of rising prices for energy and everyday goods in recent months. As the engines of the economy revved up after the initial impact of the Covid crisis, supply bottlenecks and rising demand led to unprecedented hikes in energy costs. According to the federal government, electricity prices have now reached a record high of 32.63 cents per kilowatt hour.  

With the price of energy affecting everything from transport costs to the cost of heating facilities like warehouses and offices, these rising prices are now being passed on to consumers, who are seeing their bills and weekly shopping costs rise significantly.

To compound the issue, fears of a Russian invasion of Ukraine are rising – and with them the threat of throttled gas supplies into Europe. Announcing plans to put the controversial Nord Stream 2 pipeline on ice in light of the crisis, Economy Minister Robert Habeck (Greens) warned that this winter would be one that many people would not forget. 

READ ALSO: How will the Nord Stream 2 freeze affect Germany’s gas supplies and prices?

With a perfect storm brewing, the traffic-light coalition is set to meet on Wednesday to thrash out a support package for struggling households – and particularly those on lower incomes.

Though Germany can’t control the global markets, Habeck told reporters, the government can try to ease the burden with social support measures. 

Here are some of the things we might expect to see announced on Wednesday.

Heating allowance for housing benefit recipients

The heating cost subsidy has already been decided by the coalition and is intended to relieve housing benefit recipients, students who receive the BAföG higher education grant and trainees who, for example, receive the Aufstiegs-BAföG grant.

Housing benefit recipients living alone will receive a one-time payment of €135 euros, while a two-person household will receive €175 in support. For every additional person in the household, an additional €35 will be added to the one-off payment.

Students and trainees, meanwhile, will be given a standard €115 to help with energy costs. The one-off subsidy will be doled out from June to December this year, with the requirement of having received at least one of the social benefits for at least one month between October 2021 and March 2022.

However, consumer rights organisations say the subsidy is still far too low to make a genuine difference to low-income households and have asked for it to be raised to €500. The energy union IC BSE has also slammed the fact that the handout will only benefit around 2.5 percent of the population. In light of the threat of yet another hike in energy costs on the back of the Ukraine crisis, we could see the government revising its plans this afternoon.

READ ALSO: German government to pass heating allowance law ‘by March’

Sharing the burden of the CO2 tax

The Federal Ministry of Economics and Climate Protection has drafted a proposal for sharing the cost of the CO2 tax between tenants and landlords. Until now, tenants have borne the entire brunt of the green tax, which is currently set at €25 per tonne of emissions. 

This is soon set to change.


A man turns up the thermostat on the radiator. Photo: picture alliance/dpa | Fabian Sommer

Under the plans put forward by the Economics Ministry, housing will be divided into seven tiers, depending on the level of CO2 emissions they release per square metre per year. In the lowest and thus most climate-friendly tier, with emissions of less than five kilogrammes of CO2, tenants would have to bear the entire costs for heating. Poorly renovated and poorly insulated buildings with more than 45 kilogrammes of CO2 emissions per square metre fall into the highest category. 

If the coalition does not agree on the phased model, the increased costs due to the CO2 price will be shared equally between landlord and tenant from June 1st – though the move could face legal opposition from landlords.

Abolition of the Renewable Energy Act (EEG) levy

The Renewable Energy Act (EEG) levy came into force in 2000 as a means of funding green energy projects such as wind and solar. However, with energy costs becoming increasingly unaffordable for consumers, the traffic-light coalition cut it by around 45 percent at the start of 2022 and aims to abolish it entirely by January 1st, 2023.

Currently, the EEG levy adds 3.723 cents per kilowatt hour to energy bills, meaning the average household could save around €130 a year after it’s scrapped. The government plans to replace the funding for renewable energy out of its own coffers.

According to German media reports, there is a consensus for bringing the end of the EEG levy forward to the middle of the year. A firm decision on this could be made at the cabinet meeting on Wednesday.

There may also be announcements on mechanisms to ensure that any tax cuts for energy companies are ultimately passed on to consumers after research suggested that the previous EEG levy cut barely made a dent in energy bills. 

READ ALSO: Energy tax cuts must benefit consumers, says German minister

Emergency child support

The Greens want to provide more relief for low-income families and have suggested offering an additional monthly child benefit payment as part of the support package.

However, it is unclear when such a supplement would be paid, to whom and how much it would be. The president of the social association VdK, Verena Bentele, has voiced her support for the move.

“An immediate supplement to support the children of low-income families is absolutely necessary to relieve the burden on families who have very little money anyway,” she told Tagesschau. 

Increasing the commuter allowance

Federal Minister of Finance Christian Lindner, FDP, has proposed increasing the commuter allowance to relieve the burden on professionals with long commutes to work.

Currently, the tax office allows employees to write off 30 cents for each kilometre travelled between home and work, regardless of the mode of transport used.

Cars drive over the Friedensbrücke in Frankfurt am Main.

Cars drive over the Friedensbrücke in Frankfurt am Main. Photo: picture alliance/dpa | Silas Stein

If a commuter travels more than 21 kilometres to work, they are able to write off 35 cents per kilometre. As of January 1st, 2024, this will be raised to 38 cents per kilometre.

Though the proposal to raise the allowance could offer relief for rural car-owners struggling with rising fuel costs, raising it yet again could be controversial. The Greens, for instance, consider it a non-environmentally friendly tax, while other critics say the benefits would only be felt by higher earners who are able to write off a large number of expenses per year. 

READ ALSO: Greens oppose higher commuter allowance for German workers

Introducing the ‘climate bonus’

In the run-up to the September federal elections, the Greens campaigned for returning the revenues from CO2 tax directly to citizens in order to support them with energy costs. 

The coalition agreement of the SPD, the Greens and the FDP states that a “social compensation mechanism” should be developed, which has also been called a climate premium. So far, however, it’s not clear when it will come into force and how it will be implemented.

At present, the government still needs to work out whether everyone will recieve the same amount or whether the payouts will be linked to income. A number of environmental and religious charities have come out in support of the former, while the centre-left SPD are in favour of the latter. 

However they decide to distribute the money, rising CO2 prices are likely to lead to higher tax revenues for the government, which may mean there is more money than expected to play with.

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Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Ukraine won the Eurovision Song Contest Sunday with an infectious hip-hop folk melody, boosting spirits in the embattled nation fighting off a Russian invasion that has killed thousands and displaced millions of people.

Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Riding a huge wave of public support, Kalush Orchestra beat 24 competitors in the finale of the world’s biggest live music event with “Stefania”, a rap lullaby combining Ukrainian folk and modern hip-hop rhythms.

“Please help Ukraine and Mariupol! Help Azovstal right now,” implored frontman Oleh Psiuk in English from the stage after their performance was met by a cheering audience.

In the Ukrainian capital Kyiv, the triumph was met with smiles and visible relief.

“It’s a small ray of happiness. It’s very important now for us,” said Iryna Vorobey, a 35-year-old businesswoman, adding that the support from Europe was “incredible”.

Following the win, Psiuk — whose bubblegum-pink bucket hat has made him instantly recognisable — thanked everyone who voted for his country in the contest, which is watched by millions of viewers.

“The victory is very important for Ukraine, especially this year. Thank you from the bottom of our hearts. Glory to Ukraine,” Psiuk told journalists.

Music conquers Europe

The win provided a much-needed morale boost for the embattled nation in its third month of battling much-larger Russian forces.

Mahmood & BLANCO  performing for Italy at Eurovision 2022

Mahmood & BLANCO perform on behalf of Italy during the final of the Eurovision Song contest 2022 in Turin, Italy. (Photo by Marco BERTORELLO / AFP)

“Our courage impresses the world, our music conquers Europe!” he wrote on Facebook.

“This win is so very good for our mood,” Andriy Nemkovych, a 28 year-old project manager, told AFP in Kyiv.

The victory drew praise in unlikely corners, as the deputy chief of the NATO military alliance said it showed just how much public support ex-Soviet Ukraine has in fighting off Moscow.

“I would like to congratulate Ukraine for winning the Eurovision contest,” Mircea Geoana said as he arrived in Berlin for talks that will tackle the alliance’s expansion in the wake of the Kremlin’s war.

“And this is not something I’m making in a light way because we have seen yesterday the immense public support all over Europe and Australia for the bravery of” Ukraine, Geoana said.

British Prime Minister Boris Johnson called the win “a clear reflection of not just your talent, but of the unwavering support for your fight for freedom”.

And European Council President Charles Michel said he hoped next year’s contest “can be hosted in Kyiv in a free and united Ukraine”.

‘Ready to fight’
Despite the joyous theatrics that are a hallmark of the song contest, the war in Ukraine hung heavily over the festivities this year.
The European Broadcasting Union, which organises the event, banned Russia on February 25, the day after Moscow invaded its neighbour.
“Stefania”, written by Psiuk as a tribute to his mother before the war, mixes traditional Ukrainian folk music played on flute-like instruments with an invigorating hip-hop beat. The band donned richly embroidered ethnic garb
to perform their act.
Nostalgic lyrics such as “I’ll always find my way home even if all the roads are destroyed” resonated all the more as millions of Ukrainians have been displaced by war.

Kalush Orchestra received special authorisation from Ukraine’s government to attend Eurovision, since men of fighting age are prohibited from leaving the country, but that permit expires in two days.

Psiuk said he was not sure what awaited the band as war rages back home.

“Like every Ukrainian, we are ready to fight as much as we can and go until the end.

Britain’s ‘Space Man’

Ukraine beat a host of over-the-top acts at the kitschy, quirky annual musical event, including Norway’s Subwoolfer, who sang about bananas while dressed in yellow wolf masks, and Serbia’s Konstrakta, who questioned national healthcare while meticulously scrubbing her hands onstage.

Coming in second place was Britain with Sam Ryder’s “Space Man” and its stratospheric notes, followed by Spain with the reggaeton “SloMo” from Chanel.

After a quarter-century of being shut out from the top spot, Britain had hoped to have a winner in “Space Man” and its high notes belted by the affable, long-haired Ryder.

Britain had been ahead after votes were counted from the national juries, but a jaw-dropping 439 points awarded to Ukraine from the public pushed it to the top spot.

Eurovision’s winner is chosen by a cast of music industry professionals — and members of the public — from each country, with votes for one’s home nation not allowed.

Eurovision is a hit among fans not only for the music, but for the looks on display and this year was no exception. Lithuania’s Monika Liu generated as much social media buzz for her bowl cut hairdo as her sensual and elegant

Other offerings included Greece’s “Die Together” by Amanda Georgiadi Tenfjord and “Brividi” (Shivers), a duet from Italy’s Mahmood and Blanco.

Italy had hoped the gay-themed love song would bring it a second consecutive Eurovision win after last year’s “Zitti e Buoni” (Shut up and Behave) from high-octane glam rockers Maneskin.