Tuesday

4th Oct 2022

EU commissioner clashes with Germany on energy subsidies

  • Steel factories in Germany are likely to get preferential treatment (Photo: LarsAC)

Germany is on collision course with the European Commission over subsidies to energy-intensive industries which Brussels says run counter to EU goals on promoting greener sources by 2020.

In a rare move, competition commissioner Joaquin Almunia held a press conference in Berlin on Monday (17 February) after meeting German vice-chancellor and energy minister Sigmar Gabriel.

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He said time was pressing, as the commission on 9 April will adopt new guidelines on how it will deal with state aid in the field of energy and environment.

The rules are set to enter into force on 1 July. They will outline the criteria on which competition cases will be opened, possibly leading to fines for governments if they are found in breach of EU state aid law.

The German government, for its part, is currently seeking to update a law on renewable energy which will spell out what subsidies solar and wind energy providers will get and which industries will be exempt from having to contribute to this support.

Exemption from contributing could be considered state aid and likely be scrutinised by Brussels.

The funding of the "Energiewende" - turning to greener energy sources - is a major task for the new coalition government in Germany.

Gabriel is under pressure from the industry not to increase its costs, as well as from consumers who see their energy bills go up.

"We have a lot of things to discuss with Germany, as Germany has the strongest industries in the EU and wants to promote renewables," Almunia said.

He added that, in principle, some industries can be exempt from having to contribute to the funding of renewable energies, but stressed that it should be "a minority of industrial sectors, not the whole economy."

Energy-intensive industries have applied for exemptions to the tune of €5.1 billion for this year, with Gabriel saying it will be hard to negotiate even €1 billion less.

External factors should also play a role in allowing these exemptions, Almunia said, for instance the fact that in the US energy prices have dropped, meaning that their equivalent industries have lower production costs.

Almunia mentioned steel, aluminium and zinc industries as examples of industries which could be allowed to have this preferential treatment under EU state aid rules.

"If member states ask us for a very long list of industry sectors to be exempt, the intensity of benefits will decrease. If the list is shorter, the intensity will increase," Almunia said.

EU leaders at a summit in March are expected to discuss how to fund renewable energies without hampering their industries' competitiveness, but still offering enough incentives for consumers and factories to turn "green."

The summit was initially scheduled for February, but was postponed due to lack of agreement among member states.

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