Union representatives advocate for a continued decrease in electricity levies
In a significant shift, the German government is contemplating a reduction of the electricity tax for households and businesses to the European minimum level, aiming to ease electricity prices for all consumer groups [1][3]. This move represents a potential reversal from an earlier budget proposal that excluded households and many small businesses from the electricity tax cut, sparking public outcry and criticism [3].
The coalition agreement between the CDU (Christian Democrats) and SPD (Social Democrats) had initially promised a reduction of the electricity tax for all consumers to the European minimum, with the objective of providing relief and improving competitiveness [3]. However, the draft federal budget for 2025 and 2026 scrapped this tax cut, citing "budgetary constraints," despite allowing for record new debt [3][4].
This decision has caused political friction, with CDU leaders accusing the SPD Finance Minister Lars Klingbeil of breaking the coalition agreement and jeopardizing relief for businesses and households [3]. Industry groups and consumer advocates criticize the selective tax cut approach, which currently favors sectors like agriculture and forestry but excludes many businesses and households, potentially causing market distortions and failing to address the high electricity cost burden across the board [2].
Energy companies like E.ON argue that the high electricity tax in comparison to natural gas hampers important climate-related transitions such as the adoption of heat pumps and electric vehicles [1]. The budget plan still includes measures to reduce energy costs via subsidies, gas storage levy support, and grid expansion cost sharing, but these are seen as insufficient without the broad electricity tax cut [4].
If implemented, the reduction of the electricity tax to the European minimum could provide significant relief on electricity bills for households and businesses, improving affordability, especially against the backdrop of Germany’s traditionally high electricity prices (38 euro cents/kWh, fifth highest globally in early 2025) [2]. It could also encourage the transition to electrification in heating and transport by making electric options more cost-competitive, supporting climate targets [1].
However, this policy change would increase budgetary expenditure by an estimated 5.9 billion euros due to lost tax revenue, which policymakers must balance against other fiscal priorities [1]. The government is trying to manage these fiscal implications within its budget framework [1][3].
The potential impacts also include improving industrial competitiveness and maintaining trust among trade and consumer groups by fulfilling coalition promises [2][3]. Reducing electricity tax for all consumers could also complement other government investments in renewable energy, mobility, and climate action, forming part of a broader strategy to transition Germany’s energy system [4].
CDU politician, Manuel Hagel, has stated that a lower electricity tax could reignite the economy [5]. The call for relief comes after the plan to extend the reduction of the electricity tax for industrial businesses [6]. Furthermore, the revenues from the CO2 price should be distributed unbureaucratically to all [7].
As the debate unfolds, people are regaining trust in the ability of the state and government to act [8]. The CDU and CSU faction leaders are urging the federal government to lower the electricity tax to the European minimum level for all companies and consumers [9]. The outcome of this decision could have far-reaching implications for Germany's economy, energy sector, and climate goals.
- The German government's deliberation to decrease electricity tax for households and businesses aligns with the original coalition agreement's promise to reduce electricity tax to the European minimum, aimed at providing relief and enhancing competitiveness.
- The politics surrounding the decision to scrap the electricity tax cut for households and many small businesses in the draft federal budget for 2025 and 2026 has led to a heated debate, with allegations of broken coalition agreements and jeopardized relief for businesses and households.
- Policy-and-legislation changes, such as the reduction of electricity tax to the European minimum, could have far-reaching implications for the general news landscape, potentially influencing industrial competitiveness, energy sector transitions, and Germany's climate goals.
