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What is Germany’s new gas ‘tax’ and who will pay it?

Germany is set to a bring in a new gas levy that will push up costs for customers. Here's what we know so far.

Person counting money in a kitchen
A German person counts cash in the kitchen. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

What’s happening?

A draft law shows that Germany is preparing to bring in a Gasumlage – or levy – aimed at relieving the pressure on struggling suppliers by allowing them to pass on nearly all the extra costs of soaring gas import prices to consumers. 

About half of all homes in Germany are heated with gas. The levy will apply to all gas customers, from private households to companies. It will even apply to people with long-term contracts who have already agreed a fixed price payment. 

READ ALSO: Why households in Germany will soon face gas bill hikes

What cost increases will gas customers face?

The ‘tax’ will make gas prices more expensive. However, the exact amount of the levy will not be revealed until the middle or end of August, according to sources in the government.

The Economy and Climate Minister, Robert Habeck, of the Greens, said on Thursday that the levy could be anywhere in the range of 1.5 to 5 cents per kilowatt hour. For comparison, household customers paid an average of 6.68 cents per kilowatt hour of gas in 2021, according to the Federal Network Agency. 

A much-cited calculation example of how the levy would affect customers assumes that an average four-person household consumes 20,000 kilowatt hours a year.

In this case, the extra costs would probably amount to between €300 and €1,000 per year. But Spiegel pointed out that’s this is not the end of the calculation – there is also the value-added tax. With tax, the additional costs in this example would be between €357 and €1,190.

Last week, Chancellor Olaf Scholz had spoken of lower costs. If gas prices were increased by two cents per kilowatt hour, a family of four would have to pay an additional €200 or €300 a year, Scholz had said.

However, the additional costs do not end with the levy. Experts expect that the suppliers will gradually raise their prices anyway due to the demand on the market – and that the costs will also be high in the coming years. The levy will be on top of these general price hikes. 

READ ALSO: ‘Difficult winters ahead’: Germany sets out emergency energy saving measures

What does the amount of the levy depend on?

It depends largely on what gas importers report to the government. The government will also consider the impact on customers while calculating the surcharge.

The draft plan is for importers to be able to pass on 90 percent of the higher procurement costs. The same amount per kilowatt hour is to apply to all customers, regardless of where they concluded their contract. 

Details are to be regulated in an ordinance based on the Energy Security Act, which is set to be passed in the cabinet soon. 

 Robert Habeck, Federal Minister for Economic Affairs and Climate Protection, speaks after his visit to VNG Gasspeicher GmbH at the Energiepark in Saxony-Anhalt on Thursday.

Robert Habeck, Federal Minister for Economic Affairs and Climate Protection. Photo: picture alliance/dpa | Soeren Stache

When is the levy likely to come in – and for how long?

According to initial proposals, the levy will come into force on October 1st and, as things stand at present, will apply for one and a half years, i.e. until the end of March 2024.

Until the end of September this year, importers will have to bear the extra costs themselves. 

Why is this happening?

Russia has been slashing gas deliveries to Europe, which has created a dramatic energy crisis. Before Russia’s war on Ukraine, Germany relied on Russia for 55 percent of its natural gas. Germany has reduced its dependence, but still relies on Russia for more than a third of its gas.

In view of the situation on the gas market, the government says the levy is needed to share the additional costs for replacing gas from Russia.

READ ALSO: Germany must use less gas, warns regulator 

Who benefits from the levy?

The levy is intended to relieve firms affected by the cuts in Russian gas supplies, and this is supposed to stabilise the economy.

“Without it, gas suppliers throughout the supply chain would be at risk,” the Economy Ministry said on Thursday. 

Economy Minister Habeck promised that the information provided by the companies would be closely examined. “It will also be recalculated,” Habeck said. “So we will prevent any possible wrong-doing from happening there.”

During a visit to companies in Bad Lauchstädt in Saxony-Anhalt on Thursday, Habeck said the levy would support importers and suppliers, allowing them to earn money again, and the danger of bankruptcy could be averted. “In any case, we assume that this levy mechanism will calm the market and stabilise the companies,” he said.

What financial support is being given to ordinary people?

The German government has already brought in a number of relief measures to cushion the rising cost of energy prices, including the €9 ticket and the fuel tax cut (both run for three months until the end of August).

Furthermore, there’s a payment of €300 – known as the Energiepreispauschale – going to all taxpayers from September. Keep in mind that it is subject to tax for most people.

READ MORE:

There’s also been targeted support for families, such as the Kinderbonus given out in July, and extra payments to people on benefits. 

Chancellor Scholz said last week that there would be more financial support coming for people in Germany.

Although the details are not known, the government has talked about extra support for the most vulnerable in society, including pensioners and people on benefits.

Tenants who get into financial difficulties because of high energy costs are also to be legally protected, according to Scholz. Other measures are being discussed.

Plus, against the background of high inflation, Finance Minister Christian Lindner (FDP) has brought a tax cut and higher child benefits into play so these are possibilities. 

READ ALSO: How much money will you get from Germany’s energy relief measures?

A gas flame on a stove.

A gas flame on a stove. Photo: picture alliance/dpa | Marijan Murat

What can consumers do now?

Experts say that people should be aware of the higher costs and cut down on energy usage.

“Put money aside and save energy,” said Udo Sieverding, energy expert at the consumer advice centre in North Rhine-Westphalia. He believes it is possible that instalments could soon be tripled or quadrupled.

Kerstin Andreae, Chairwoman of the Executive Board of the German Association of Energy and Water Industries (BDEW) said: “The more gas that is  saved today, the more we can use for storage.”

“Prices will remain high for a long time,” economist Veronika Grimm told Spiegel, underlining that Germany is in it for the long haul.

READ ALSO: KEY POINTS- What Germany’s budget means for you

The German Technical and Scientific Association for Gas and Water (DVGW) recommends people consider extensive measures such as hydraulic balancing of heating systems and maintenance wherever possible to keep things in tip-top shape.

Some associations advise against fan heaters, however. Not only are they expensive, but in the worst case they could lead to local power cuts in winter.

Other energy-saving measures including turning off the heating at night and when away from home, leaving rooms that are not used often cooler, taking showers instead of baths (and making them slightly less hot), installing energy-saving shower heads and heating thermostats, and reducing temperatures in your home by a few degrees.

READ MORE: 8 simple ways you can save on heating costs in Germany

Member comments

  1. Germany is so broken. There are literally 10’s of thousands of elected officials who are incompetent, making decisions that have put this country in a bind for decades to come, and Germans stand around going hmmf, i guess I pay more. Its beyond incredible that politicians in Germany are so incompetent and their only answer over and over again is to raise taxes…..

  2. Well Sholz did promise we won’t walk alone in protecting gas company profits. If bills go up by 1,000 euroes a year they probably won’t be getting paid. What do I do? Not eat so I can save up money to pay for the heating and electricity im not using because its expensive? And the €300 next month? After tax comes off your left with 160 or so. They’ll be swallowed by the energy giants that are bailed out by the government. Profits rise and poverty rises. We are not walking together thats for sure.

    Putin has promised to deliver the contractual obligations if Germany opens nord stream 2. I think its high time that happens. Really relieve the pressure on the people. What’s going on in the Ukraine should hold no bearing on the gas imports of this country. German people will die this winter because of sanctions. And it will be mostly old people and poor people.

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ENERGY

REVEALED: Germany’s planned hardship fund to help with energy bills

The gas and electricity price caps are coming, and the government wants to pay people's energy bills in December - but will that be enough to stop people falling into hardship? Germany's Economics Ministry thinks it won't be and has drafted plans for a new hardship fund. Here's what you need to know.

REVEALED: Germany's planned hardship fund to help with energy bills

When Germany’s traffic light coalition parties – the SPD, Greens and FDP – took office last December, they had no idea that they would be facing an energy crisis on such a major scale.

But with Russia’s invasion of Ukraine sending the gas market into turmoil, the coalition’s big plans have been put on the backburner as they work out how best to support people with rising costs. 

Under the latest set of energy relief measures put forward by the Gas Price Commission, the government will shoulder the cost of people’s energy bills this December. It also plans to introduce a cap on both electricity and gas prices, which will come into force next March and be backdated to January.

READ ALSO: Germany plans to cap energy prices from start of 2023

This multi-billion relief package is likely to soften the blow for many households, but according to a new government document obtained by Bild, ministers are concerned that it won’t be enough to stop many people – and businesses – falling into financial hardship.

To ensure this doesn’t happen, federal and state economists ministers want to set aside billions more for additional aid. 

Here’s who can get hold of the extra cash – and how.

Renters and private home owners

People who rent an apartment in Germany and home owners who live in their properties can access additional help from the state if they can prove they’re over-burdened by their heating and energy costs.

That could be due to an eye-wateringly high back-payment for energy bills demanded by the landlord or due to the fact that they have to purchase expensive fuel such as wood pellets for heating. 

More specifically, people claiming unemployment benefits such as Bürgergeld can get some extra cash from the Jobcenter after their bills are calculated by the landlord. If they’re facing a hefty back-payment, or Nachzahlung, they can get up to three months of Bürgergeld retroactively to help cover the costs. 

In addition, someone who wants to claim Bürgergeld for a single month will be spared from having to prove the amount of money they have in the bank. Under the ordinary rules for Bürgergeld claimants, job seekers must have less than €40,000 in savings.

According to the government’s calculations, this emergency buffer is set to cost around €500 million. Claims for additional support will be handled by the job centres or social offices.

Small- and medium-sized businesses (SMEs)

Small business owners have been among the hardest hit by the energy crisis – but luckily help may be on its way. 

In the document obtained by Bild, ministers say they assume that the gas and electricity price cap will be an adequate level of support for most SMEs. Nevertheless, there could be a few circumstances in which business owners slip through the net:

  • Business owners may already be facing huge hikes in their energy bills before the price caps come into force, for example in the form of a big back-payment for energy costs over several months, or
  • Businesses may find that, due to exceptional circumstances, they’re still unable to pay their bills – even after the price caps are introduced. 

In these two scenarios, SMEs can apply for extra support from the government. 

To be eligible, businesses must either show that their energy costs quadrupled at least three months between January and November 2022, or they’ll have to show that their energy costs have also multiplied in spite of the energy price cap and that their business is highly energy-intensive or costly.

The government expects this support package to cost around €1 billion and says that the details will be worked out after state premiers agree to the proposals.  

READ ALSO: How electricity prices are rising across Germany

Housing companies 

Large landlords could also be in line for some additional government aid under the ministers’ plans. Due to the way the current rental system works, many are paying high bills for heating and energy that they’re not yet able to recoup from tenants in the end-of-year bill.

Housing complexes in Berlin.

Housing complexes in Berlin. Photo: picture alliance/dpa | Monika Skolimowska

To help housing companies that are in this situation, the government wants to offer loans that could help tide them over. Twenty percent of this credit would be secured by the federal states, and the measure is expected to cost around €1.1 billion. 

Hospitals and care homes  

Care facilities and clinics face exorbitant energy bills – even in ordinary times – so this group of institutions will also be given financial aid, the draft said.

This will come in the form of a one-off support payment and ongoing support with gas and electricity bills. Hospitals and care homes will in many cases get their additional costs for energy completely refunded by the state until April 2024. Social agencies and social service providers will also be given subsidies and financial aid to help deal with their increased overheads. 

In addition, cultural sites and facilities like museums and art galleries will get subsidies intended to flatten out the rise in energy costs. In most cases, the energy price cap only applies to 80 percent of a business’ ordinary consumption, but this limit will be dispensed with for cultural institutions. 

However, the government says it still wants to incentive energy-saving measures as well as offering financial support. 

READ ALSO: When will people in Germany get their December gas bill payout?

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