Handelsblatt Exclusive

A New Renewable Energy Tax?

  • Why it matters

    Why it matters

    Changing the funding model of Germany’s renewable energy transition could drastically impact the businesses of utilities, such as E.ON, Innogy, RWE and Uniper, as well as owners of or investors in renewable energy plants, such as Capital Stage.

  • Facts

    Facts

    • Following Japan’s nuclear disaster in Fukushima in 2011, Germany decided to phase out all nuclear energy in the country by 2022 and draw at least 80 percent of electricity from renewables by 2050.
    • To expand renewable energy production, Germany has slapped a levy on electricity bills, now making up around 54 percent of the price per kilowatt hour and giving a retail price of €0.288, or $0.31.
    • Taxes and fees make up just 27 percent of the price of natural gas and oil, making them more competitive in the heating and mobility markets.
  • Audio

    Audio

  • Pdf
main 83520856 dpa Picture-Alliance Patrick Pleul ZB modern wind mill power electricity Brandenburg wind park
Nature provides it for free, but it costs a fortune to untap it. Source: dpa Picture-Alliance / Patrick Pleul / ZB

One reason why Germany’s transition to renewable energy sources has been so successful is its funding model. A surcharge on electricity bills has been financing the expansion of solar and wind parks, biogas and hydro power. The levy, however, has risen dramatically since its introduction in 2000: from €883 million to an estimated €26.6 billion this year ($1 billion – $29.8 billion).

Consumers and companies pay this amount each year, posing a burden on consumption, profitability and competitiveness. It is the main reason politicians from right to left want to change the funding system to keep it viable and acceptable in the long run. It is expected to happen when the next government takes office after federal elections in September.

In the run-up to the makeover, the Cologne Institute for Economic Research, or IW as it is known by its German acronym, has proposed a new model, of which Handelsblatt has obtained a copy. The economic think tank, funded by business and employers’ associations, suggests abolishing the electricity levy and instead introducing a surcharge on top of income and corporate tax rates. The institute calls the new levy an “eco-solidarity tax” in reference to the Solidarity Tax initially levied in 1991 to finance the rebuilding of the former East Germany, which is supposed to end – after two decades of extensions – in 2019.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.