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ENERGY

KEY POINTS: Germany’s proposals for future energy price relief

Germany's traffic-light coalition has produced a set of draft proposals for a new package of energy relief measures - but the cabinet is said to be split on which ones to implement. Here are the key plans being discussed.

Electricity meter
A German electricity meter. Photo: picture alliance / dpa | Jan Woitas

With energy prices continuing to soar, yet another package of relief measures is in the pipelines. But each of the parties that make up the traffic-light coalition – the SPD, Greens and FDP – has their own distinct vision on how best to support businesses and consumers.

A set of draft proposals obtained by ARD-Hauptstadtstudio lays out a number of potential measures that could be used to offer relief on fuel, heating and electricity costs. 

According to ARD, there are still a number of disagreements around the plans, but the government hopes to produce a finalised package of measures on Wednesday evening.

Here are the key points in the draft proposals to be discussed.

Fuel and car-tax rebate

Above all, the pro-business FDP is pushing for relief for car owners.

Following two consecutive increases to the commuter allowance – which allows employees to write-off some of the costs of travelling to work – there could be further financial support on the horizon.

The key measure put forward by Finance Minister Christian Lindner (FDP) is a fuel rebate for car drivers. This plan would see drivers treated to an instant discount at the pump, which petrol station operators would then have to claim back from the tax office. 

Also included in the measures is a “one-off rebate” in car tax. Presumably this would be claimed by drivers in their 2022 tax return, meaning more in their pockets in the coming year.

The FDP are likely to face pushback on these ideas from the Greens and from Economics Minister Robert Habeck in particular, who has previously spoken out against a potential fuel rebate.

READ ALSO: German government announces fresh relief package for high energy costs

Expansion of natural gas production

The FDP are also said to be in favour of expanding Germany’s domestic natural gas production. The question of how to secure natural gas is a particularly urgent one in light of the ongoing Ukraine war and Germany’s attempts to ween itself off Russian gas.

This question would have to carefully thrashed out with the Greens, however, particularly when it comes to investing funds that could be used for renewables instead.

Ban on gas heating for new-builds 

With the double-pronged goal of being climate-friendly and socially minded, the Greens are allegedly asking for a ban on gas heating systems from 2023.

Though existing buildings with gas heating wouldn’t be affected, the ban would affect any new housing developed after next year by banning the installation of this type of heater.

Energy money

Another classic policy from the Greens contained in the paper in the disbursement of so-called ‘energy money’ or an ‘energy fund’. This proposal was contained in the Greens’ pre-election manifesto but so far hasn’t been implemented due to questions about how to distribute it.

Essentially, the energy money is a redistribution of the CO2 tax back to consumers – with lower-income households and those who use less energy benefitting the most. 

According to ARD, the Greens now propose that the Finance Ministry develop a way of doling out the money to German taxpayers using their tax ID. The deadline for this would be October.

Petrol prices

Current petrol and diesel prices are listed outside a petrol station on Prenzlauer Alley in Berlin. Photo: picture alliance/dpa | Jörg Carstensen

One-off energy subsidy

The centre-left SPD, who are also the largest party in the coalition, have set their sights on measures for lower-income and vulnerable groups. 

The first of these would be a one-time subsidy for workers in Germany, which would be tapered by income and according to the number of children in any given family. One key issue with this is that the relief would be applied to the 2023 tax return, which means it would be another two years before consumers experience any benefits.

Apparently, the FDP are firmly against this idea and early signs are that it could be replaced with a so-called mobility allowance for people on small and medium incomes.

The exact amounts of either type of relief are currently unclear and would presumably have to be thrashed out in the cabinet.

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

Child bonus and more for benefit recipients

Another SPD proposal is that a child bonus (Kinderbonus) – similar to the one introduced during the initial waves of the Covid pandemic – should be brought in again “as soon as possible”.

The SPD also wants to ensure that the flat-rate heating allowance for housing benefit recipients, which was agreed in the last package of measures, is paid on a long-term basis.

They also suggest increasing the current supplement by a further €100 as a one-off bonus this year. 

Child bonus

Money and dummies lie together on a table. The SPD is believed to be pushing for a new ‘child bonus’ for families. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

Senior citizens’ lump sum

Pensioners should also benefit from a one-time energy payout, according to the proposals.

The draft outlines the importance of elderly people remaining mobile in the community, even if they aren’t travelling to work each day.

The SPD is apparently also concerned about public transport fares and wants the coalition to ensure that bus and train fares do not rise or that services aren’t cut as a result of rising fuel prices.

READ ALSO: 

What about a cap on energy prices?

This is a measure that the EU Commission is said to be considering at present, alongside other measures such as joint gas purchases throughout the bloc. The EU package of measures will also be discussed on Wednesday.

But Germany is believed to be one of the primary voices against such a measure, with the FDP in particular speaking out against any state intervention in the natural gas or mineral oil markets. 

A more liberal-friendly policy would be to cut taxes on things like electricity and gas in order to provide relief for both businesses and consumers. However, the issue with this is that businesses could use the tax cuts as a means of accruing more profit and continue to raise their prices regardless.

EU commission president Ursula von der Leyen

EU Commission President Ursula von der Leyen (CDU). The EU is currently considering an energy price cap, among other measures. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

When will these measures come in?

As we mentioned, it’s still very early days yet – and many of the policies outlined above the subject of fierce debate within the cabinet.

What we’re likely to see later on Wednesday is some kind of Frankenstein’s Monster, with different measures cobbled together from each party.

Some of these may offer more immediate support – like the child bonus or the energy supplement – while other types of support could be doled out through tax rebates and may therefore take several months or years to come into force, which won’t be much comfort to people struggling at the moment. 

Others, like the Greens’ proposals to ban gas heating, would be structural measures dedicated to the transition away from volatile and climate-damaging fossil fuels. The benefits of these presumably wouldn’t be felt for several years. 

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ENERGY

Should tenants in Germany be shielded from energy price hikes?

Gas prices have more than tripled in the past year, prompting tenants' rights advocates to call for more social support and a cap on energy costs.

Should tenants in Germany be shielded from energy price hikes?

The German’s Tenants’ Association is calling on the government to put together a new energy relief package to help renters deal with spiralling energy costs.

Gas has become an increasing scarce resource in Germany, with the Economics Ministry raising the alert level recently after Russia docked supplies by 60 percent.

The continued supply issues have caused prices to skyrocket. According to the German import prices published on Thursday, natural gas was three times as expensive in May 2022 as it was in May a year ago.

In light of the exploding prices, the German Tenants’ Association is putting the government under pressure to offer greater relief for renters.

READ ALSO: 

Proposals on the table include a moratorium on terminating tenancy agreements and a permanent heating cost subsidy for all low-income households.

The Tenants’ Association has argued that nobody should face eviction for being unable to cope with soaring bills and is urging the government to adjust housing benefits in line with the higher prices. 

Gas price cap

Renters’ advocates have also joined a chorus of people advocating for a cap on consumer gas prices to prevent costs from rising indefinitely.

Recently, Frank Bsirske, a member of the parliamentary Green Party and former head of the trade union Verdi, spoke out in favour of capping prices. Bavaria’s economics minister and Lower Saxony’s energy minister have also advocated for a gas price cap in the past. 

According to the tenants’ association, the vast majority of tenants use gas for heating and are directly affected by recent price increases.

At the G7 summit in Bavaria this week, leaders of the developed nations discussed plans for a coordinated cut in oil prices to prevent Russia from reaping the rewards of the energy crisis. 

In an initiative spearheaded by the US, the group of rich nations agreed to task ministers will developing a proposal that would see consumer countries refusing to pay more than a set price for oil imports from Russia.

READ ALSO: Germany and G7 to ‘develop a price cap’ on Russian oil

A gas price cap would likely be carried out on a more national level, with the government regulating how much of their costs energy companies can pass onto consumers. 

Strict contract laws preventing sudden price hikes mean that tenants in Germany are unlikely to feel the full force of the rising gas prices this year

However, the Tenant’s Association pointed out that, if there is a significant reduction in gas imports, the Federal Network Agency could activate an emergency clause known as the price adjustment clause.

This would allow gas suppliers to pass on higher prices to their customers at short notice. 

The Tenants’ Association has warned that the consequences of an immediate market price adjustment, if it happens, should be legally regulated and socially cushioned.

In the case of the price adjustment clause being activated, the government would have to regulate the costs that companies were allowed to pass onto consumers to prevent social upheaval. 

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