Germany should abolish electricity tax to give e-mobility a push – economic institute

Germany should scrap the electricity tax while phasing out subsidies for the purchase of new electric cars to support the expansion of e-mobility, said a paper by the Institute for Economic Research (ifo). The authors, ifo head Clemens Fuest and the director of the ifo Center for Industrial Organization and New Technologies Oliver Falck, also write that price subsidies for charging electric cars are not the right solution. “Subsidising the price of electricity for electric cars reduces the incentive to save electricity and thus exacerbates shortages in other sectors,” said Fuest. The paper, commissioned by the Chamber of Commerce and Industry for Munich and Upper Bavaria, also criticises that the new EU emissions trading system for the transport and building sectors (to be implemented from 2027) includes a mechanism that could limit the CO2 price. “As a result, there may not be enough incentives for a sufficient number of buyers to switch to electric cars,” writes ifo.

As energy taxes are governed by EU rules, it would remain to be seen whether abolishing the electricity tax in Germany would be viewed as in line with those rules, ifo told Clean Energy Wire. However, it said this should be possible in principle, also because other taxes on electricity (such as VAT) remained in place. To ensure a fair environment in the common market, the European Union had introduced the directive on energy taxation, which includes minimum tax levels on the different types of energy, including electricity. The EU aims to revise the directive so that fuels will start being taxed according to their energy content and environmental performance, but talks have moved slowly and finding consensus proves difficult, reported Euractiv earlier this year. There are increasing doubts over whether Germany can reach its target for electric cars. “The current state of affairs signals that the German government’s target of 15 million electric vehicles in 2030 will be missed by 50 percent,” according to the Center of Automotive Management (CAR).