German government divided over subsidising industry electricity

German chancellor Olaf Scholz (SPD) and finance minister Christian Lindner (FDP) have criticised plans by the economy ministry to subsidise the electricity used by industrial companies to boost their international competitiveness. News agency Reuters reported that the chancellor said such a policy would “not end well.” He added: “As an economy, we will not be able to sustain subsidising everything that takes place in normal economic activity in the long run. And we should not get into the habit of doing so.” Finance minister Lindner wrote in a guest commentary in Handelsblatt that he was critical of the proposal. “Relying primarily on direct state aid is economically unwise,” he wrote. “It also contradicts the principles of our social market economy.”

Green Party economy minister Robert Habeck is currently working on a proposal to lower electricity prices for energy-intensive industry. “The whole industry is talking intensively about an industrial electricity price at the moment - and I think we have to do that,” Habeck said, according to a report in Merkur. If Germany did not cap prices, it “may lose the industries of the future,” he argued.

The economy ministry is working on proposals for industry electricity prices in order to shield companies from rising costs. While details of the proposal are not yet known, such support could happen, for example, by way of subsidising offshore electricity for industry customers through an auction scheme. Amid the energy crisis fuelled by Russia’s war against Ukraine, both private and commercial consumers have faced drastic price increases. The government has introduced support schemes to help the industry, but these are temporary. Some politicians have called for subsidies to bring electricity prices for energy-intensive industries down to a few cents per kilowatt hour from January 2024, Reuters wrote.