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.