Only a first step for Germany
The agreement among the coalition parties on a billion-dollar electricity price package is not only economically important and correct but also politically savvy. It allows the coalition to collectively send a strong "We understood" signal to the economy and, at the same time, inclusively involve a broad spectrum of small and medium-sized enterprises in the relief measures. Additionally, the package puts an end to the protracted discussions on industrial electricity prices, which have long led to no resolution. On one hand, it was clear that the Greens and the FDP would not converge on this issue. On the other hand, signals from Brussels were very clear that the EU competition authority would have vetoed it sooner or later.
Nevertheless, the mentioned cost reduction of a significant 12 billion euros in the coming year needs to be put into perspective. In particular, energy-intensive companies – such as steel and aluminum manufacturers or chemical companies – cannot be satisfied. They only receive the assurance that existing relief regulations will remain in place for now. When the announced reduction in electricity tax is juxtaposed with the elimination of the peak compensation, these companies will experience only a slight reduction in electricity prices of 0.1 cents per kilowatt-hour, plus less bureaucracy due to simplified processes. That is minimal. If, in the course of electricity price compensations, the deductible is eliminated for the 350 most energy-intensive businesses, it specifically amounts to only about 70,000 euros per facility per year. That is not much. There will be no significant additional new relief for energy-intensive sectors. It is more about maintaining the status quo. Whether this is enough to persuade CEOs contemplating relocation is rather doubtful. A "electricity price bridge" for the next few years, as envisioned in the approved tax package by Minister of Economic Affairs Robert Habeck, is unlikely to be recognized by them.
Another point is that the measures solely focus on the manufacturing sector. Retail, craftsmanship, services, and even some green technologies may also demand claims to affordable energy costs. Ideally, the electricity tax should be minimized for everyone. However, such a consistent step may not have been feasible given the current tight budget situation.