Study offers critical look at German government energy subsidies

A new report published by the Kiel Institute for the World Economy examines the use and costs of government subsidies in German industry, including controversial areas such as coal production, nuclear waste disposal or industry rebates on energy taxes. The report, written by Claus-Friedrich Laaser and Astrid Rosenschon, points out that once introduced, subsidies often burden the state budget for decades. In 2017, the federal government spent 2.6 billion euros to subsidise hard coal mining despite the fact the government had agreed a decade ago to end unprofitable hard coal production. While coal subsidies will end this year, the government will continue to pay for the environmental damage caused by coal mining, as well as to support miners, the authors say. Similarly, taxpayers are still funding nuclear power despite the nuclear phase-out. To date, the disposal of radioactive waste has cost the federal government some 150 million euros a year on average. The researchers also criticise “contradictory” subsidies, such as energy tax exemptions for energy-intensive industries. These amount to “a subsidy of production procedures that are especially damaging for the environment or use a lot of energy,” meaning that a full tax on these companies could be particularly effective. The current exemption system “renders the entire energy and environmental policy absurd,” the authors write.

Read the report in German here.

See the CLEW dossier The next German government and the energy transition for more information.