German experts publish €91bn plan to cut gas prices – EURACTIV.com
A newly created commission of experts has presented a two-step plan to mitigate the impact of gas prices on consumers and industry, which will use a large part of the controversial €200 billion crisis shield of the Germany.
On September 23, the German government set up a group of experts to find the optimal way to reduce gas prices.
The group, led by economist Veronika Grimm, BDI industry association head Siegfried Russwurm, and IG BCE chemical industry union leader Michael Vassiliadis, presented their short-term solution to the political stalemate of Berlin Monday October 10.
In doing so, experts and interest representatives had to straddle an important line: avoiding a gasoline shortage while reducing the impacts of exorbitant gasoline prices.
Grimm noted that Germany needs to save 20% gas to avoid a winter gas shortage. “It’s a balancing act,” conceded Russwurm
“On the one hand, maintaining savings incentives, on the other hand, securing competitiveness through controlling gas prices, fighting the recession and, above all, securing production sites in Germany,” added Russwurm.
40% of the gas is used by households and small businesses, the rest is used to generate electricity and by large businesses, the highlights of the committee report. So far, the industry has realized the bulk of the savings: up to a quarter of industry use has been reduced through switching to oil, process optimization and a “significant reduction ” from production.
Experts offer a two-step plan. For consumers, the government is being asked to cover a month’s gas bill in December, followed by a subsidy of 80% of normal September consumption at €0.12 per kilowatt hour (KWh) from spring.
Industry, meanwhile, will receive 70% of gas consumption in 2021 at a price of €0.07 per KWh from January. Gas-fired power plants will not be subsidized in any way.
“Companies can use the subsidized gas for their own purposes or sell it on the market,” the proposal explains.
In total, the measure could cost the German state around 91 billion euros. €66 billion will go to supporting consumers, a figure that includes small and medium-sized businesses. 25 billion euros will go to supporting the industry.
According to Georg Zachmann, of the Brussels think tank Bruegel, the proposal to lighten the burden on customers “is surprisingly effective in preserving savings incentives”.
The potential for cost savings “will be heavily dependent on administrative implementation and communication,” he added.
“Savings incentives are also well preserved for industrial consumers. In my opinion, this is the most important criterion of the internal market,” the expert told EURACTIV.
Inventory increase
The news that German companies could have their gas subsidized by the state immediately boosted the stock price of companies like chemical giant BASF.
The news that BASF might be able to resell the large amounts of gas it could get on the cheap sent the stock price jumping more than 6% on Monday.
As one of the largest individual users of gas in 2021, BASF used around 37 terawatt hours at its Ludwigshaven facility, which could net the company a resale profit of around 2.6 billion euros. , explained Zachmann.
Paying “substantial amounts” to German companies may be “unintentional” and “distort markets”, he noted.
The chemical industry was jubilant: “The gas price brake is a very important first step that gives many companies some of their confidence in their ability to weather the crisis,” said industry association VCI.
Meanwhile, European competition authorities in Brussels are carefully monitoring German spending, keen to avoid distortions of competition in the EU’s internal market. And when they make their decision, they will consider the long-term impact of the measures on the green transition.
“It would be better to favor short-term savings and even better longer-term substitute investments,” Zachmann noted in this regard.
decision time
Now that the experts have presented their proposals, “it’s up to the politicians to decide,” Russwurm said.
Several prominent politicians have already expressed their desire to take expert advice in tackling fuel prices, a sentiment that resulted in the group being formed just 20 days ago.
But as the three governing parties jostle for their individual priorities, their final approach may differ from the experts’ recommendations.
“The expert commission’s proposals form a good basis for the now necessary consultations in government and parliament,” said Matthias Miersch, deputy leader in the Bundestag of Chancellor Scholz’s SPD party.
[Edited by Frédéric Simon]
