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ENERGY

Germany to spend €200 billion to cap soaring energy costs

Germany is to ditch plans for a gas levy on consumers and introduce a gas price cap to curb soaring bills, Chancellor Olaf Scholz announced on Thursday.

Economics and Climate Minister Robert Habeck (Greens), Chancellor Olaf Scholz (SPD,) and Finance Minister Christian Lindner (FDP), present the German government's plans for energy supply and price caps for gas.
Economics and Climate Minister Robert Habeck (Greens), Chancellor Olaf Scholz (SPD,) and Finance Minister Christian Lindner (FDP), present the German government's plans for energy supply and price caps for gas. Photo: picture alliance/dpa | Kay Nietfeld

The government will plough €200 billion into shielding households and businesses from skyrocketing energy costs in the wake of the Russian invasion of Ukraine.

“The German government will do everything so that prices sink,” Scholz said at a press conference via video link because he is currently isolating due to a Covid infection. He said the package includes a gas price cap and a plan to cream off windfall profits made by some energy companies.

The package is designed to ensure that Germany can contend with the fallout from rising prices “this year and next year and the one after that”, Scholz said.

As expected, the controversial gas levy plans are being shelved. The government had been planning to pass on some of the soaring costs of energy to consumers from October to prop up struggling suppliers.

READ ALSO: Will Germany set a gas price cap – and how would it work?

With electricity and gas prices spiralling upwards, the leaders of Germany’s 16 federal states on Wednesday called on the government to introduce an energy price cap.

Several other politicians – also within the government’s own traffic light coalition – had also urged for the levy to be scrapped and a price cap to be introduced.

Scholz said there should be no extra burden for consumers and companies. “With the €200 billion, we have the means to finance all of this,” he said, adding that the gas levy was no longer needed. 

Protection from rising prices was needed for “pensioners, workers, families… but also bakers and craftsmen or big industrial plants that are dependent on electricity and the gas supply”, Scholz said.

Scholz pointed out that gas storage facilities in Germany are currently more than 90 percent full. “We will do everything we can to use the storage facilities for the winter,” he said. 

‘Energy war’

Germany, which has been highly dependent on imports of fossil fuels from Russia to meet its energy needs, has been battling to find other sources as supplies dwindle.

Thursday’s announcement came as inflation in Germany soared to a 70-year high of 10 percent in September, according to official data, driven higher by spiking energy prices.

“We find ourselves in an energy war over prosperity and freedom,” Finance Minister Christian Lindner said at the press conference.

A person turns down the radiator in Germany. Gas bills are set to rise significantly.

A person turns down the radiator in Germany. Photo: picture alliance/dpa | Marcus Brandt

Protecting consumers against the rising bills was a “crystal clear answer” to Russian President Vladimir Putin that Germany was “strong economically”.

The gas price cap should cover “at least a part” of the gas used by households and businesses, while “maintaining an incentive to reduce gas use” over the winter as supplies are limited, the government said in a statement.

At the same time, the government would work to limit the price of electricity for consumers by skimming off profits made by energy firms that have profited by the higher asking prices for gas but which do not use the energy source to generate power.

The gas levy would have seen 2.4 cents per kilowatt hour added to gas bills, adding an extra burden of several hundred euros per household. The government announced it would also reduce VAT on gas consumption to seven percent, down from the usual 19 percent. 

There had been major controversy over the surcharge after it emerged that some companies registered to receive a share included firms that have not been struggling in the current situation. 

Economics and Climate Minister Robert Habeck admitted mistakes in the design of the levy and he had pledged to change it. 

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ENERGY

Norway and Germany seek Nato-led cooperation for key undersea structures

Germany and Norway want to start a NATO-led alliance to protect critical underwater infrastructure, their leaders said on Wednesday, weeks after explosions hit two key gas pipelines in the fallout from the war in Ukraine.

Norway and Germany seek Nato-led cooperation for key undersea structures

 “We are in the process of asking the NATO Secretary General to set up a coordination office for the protection of underwater infrastructure,” German Chancellor Olaf Scholz told a press conference in Berlin.

“We take the protection of our critical infrastructure very seriously and nobody should believe that attacks will remain without consequences,” he said.

Norwegian Prime Minister Jonas Gahr Store said the alliance would be “an informal initiative to exchange between civilian and also military actors” with NATO providing “a centre, a coordination point”.

Underwater cables and pipelines were “arteries of the modern economy” and it was necessary to create “a coordinated joint effort to ensure security for this infrastructure”, he said.

Scholz said he and Store would propose the plan to NATO Secretary General Jens Stoltenberg, who is due in Berlin for a security conference. The Nord Stream 1 and 2 gas pipelines off the Danish island of Bornholm were targeted by two huge explosions at the end of September.

The pipelines, which connect Russia to Germany, had been at the centre of geopolitical tensions as Moscow cut gas supplies to Europe in suspected
retaliation to Western sanctions over the invasion of Ukraine.

Although they were not in operation when the leaks occurred, they both still contained gas which spewed up through the water and into the atmosphere.

Russia and Western countries, particularly the United States, have traded bitter barbs over who is responsible for the blasts.

Several European countries have since taken steps to increase security around critical infrastructure. 

The G7 interior ministers warned earlier this month at a meeting in Germany that the Nord Stream explosions had highlighted “the need to better protect our critical infrastructure”.

Norway has become Europe’s main gas supplier in the wake of the war in Ukraine, taking the place of Russia.

The Scandinavian country has a vast network of pipelines, stretching for almost 9,000 kilometres, linking it to the continent, which experts have said are at risk of sabotage.

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