EU greenlights €5 bn German state aid scheme for companies affected by rising energy prices

The European Commission has given the greenlight for a German government scheme supporting energy intensive industries grappling with the rise in prices exacerbated by Russia’s war against Ukraine. Energy and trade intensive companies have been hit particularly hard by the current crisis, executive vice-president Margrethe Vestager said in a press release, adding that “this five-billion-euro scheme will enable Germany to mitigate the impact of the rising input costs on these companies and support the continuation of their activities in this difficult context.” Eligible energy and trade-intensive companies can receive a subsidy of up to 50 million euros for their increased natural gas and electricity costs, the German government confirmed. Access to the support payments is subject to relatively high hurdles. For example, from July to September, natural gas is only subsidised by up to 80 percent of the quantity the company consumed in the same period of the previous year, to ensure there is no incentive to consume more. Christoph Maurer, managing director of the consulting firm Consentec, told Tagesspiegel Background that subsidising energy consumption is fundamentally problematic because it is important to not distort price signals. Due to the restrictions, however, this effect is not very pronounced, he said.

The German government decided on a support package for businesses affected by the fallout of the war in April. Sharply rising energy prices have put a strain on businesses across Europe since the second half of 2021 and Russia's invasion of Ukraine has increased worries that companies could collapse due to price rises.