Reduction Proposed in Electricity Prices Across All Member States by the Commission
In a recent development, the German government has decided to implement a limited reduction in the electricity tax, primarily benefiting energy-intensive industries and some major businesses. This move, which excludes households and smaller businesses, has sparked controversy and dissatisfaction among these groups who continue to grapple with high electricity prices.
The government's priority on fiscal discipline is evident in this decision, as they aim to limit broad subsidies to avoid overspending in the 2025 federal budget. This cautious approach is a response to legal and budgetary constraints, including a court ruling that restricts reallocating unused pandemic funds.
The coalition committee, the central planning committee of the new government alliance, has reaffirmed this decision, despite backing from the SPD and Greens for a universal electricity tax cut. The committee, consisting of ten men and only one woman, has also confirmed the relief measures agreed upon, which will result in a relief of up to 3 cents per kilowatt-hour (kWh) for all consumers, potentially saving up to 100 euros per year for a family of four.
In a positive note, relief measures for net fees and the abolition of the gas storage surcharge for gas customers have been initiated. Moreover, the second part of the pension package, including the active pension, early start pension, and occupational pension strengthening law, will be decided in the cabinet in the fall and implemented (except for the early start pension) as of January 1, 2026. The financing for the extended mother's pension, which aims to extend the child-rearing time in the statutory pension insurance to three years for children born before 1992, will come from tax funds.
However, the extended mother's pension, a project demanded by the CSU, will start as early as January 1, 2027, one year earlier than initially assumed. If a technical implementation is only possible at a later date, the mother's pension will be paid retroactively to those affected.
The leaders of Union and SPD have not yet reached an agreement on a further reduction in the electricity tax for all businesses and private households. The cost of such a reduction, estimated at an additional 5.4 billion euros next year, is a significant factor in this ongoing negotiation.
The extension of the target line, which is particularly important to the SPD, is to be extended over the current year until 2031. The components of extending the target line for the pension level and mother's pension will be implemented as the first step with the current pension package 2025.
In the coalition agreement, Union and SPD announced their intention to permanently relieve companies and consumers in Germany by at least 5 cents per kWh with a package of measures. However, the current decision on the electricity tax cut seems to deviate from this initial promise, leading to ongoing discussions and potential adjustments in the future.
The government's cautious approach towards broad subsidies in the 2025 federal budget, as demonstrated by the limited reduction in electricity tax, is primarily aimed at energy-intensive industries and major businesses, with a focus on fiscal discipline. Meanwhile, the coalition committee has confirmed relief measures for all consumers, including a reduction of up to 3 cents per kilowatt-hour (kWh), which could save a family of four up to 100 euros per year.
