Habeck’s idea misses Germany’s core problem
Such aid would distort competition, writes WELT author Jan Dams
Source: Jorg Greuel/Photodisc/Getty Images; Verena Bruening; Assembly WORLD
Federal Minister of Economics Robert Habeck wants to promote industry with lower electricity prices – and thereby prevent the deindustrialization of Germany. It doesn’t matter that the idea could be expensive. There are other ways to help the economy.
BEconomics Minister Robert Habeck (Greens) is worried. Apart from the question of whether he should fire State Secretary Patrick Graichen because he is said to have put his best man in the lucrative chief post at the German Energy Agency (dena), it is above all the competitiveness of German industry that is becoming a problem for the minister. The companies suffer: from excessive bureaucracy at the location. under the skills shortage. Above all, however, under energy prices, which are much higher in Germany than in competing locations.
Russia’s attack on Ukraine has pushed the already high prices into prohibitive levels. The fact that the USA is simultaneously trying to lure local companies and their production to America with billions in subsidies from their Inflation Reduction Act (IRA) does not make things any better. Habeck is required to do something about the impending exodus.
The Vice Chancellor plans to help the industry with a reduced electricity price. For a limited time. Maybe five years until the transition to green and therefore cheaper energy should be complete. Habeck’s State Secretary Graichen has announced an electricity price of five or six cents per kilowatt hour. In essence, it is about cushioning the price difference between the significantly higher market price and the promised industrial electricity price with tax funds.
“What’s the cost of the world?” the Economics Minister and his staff seem to be asking themselves. There is talk of low double-digit billions for the planned industrial electricity price within five years. That sounds like peanuts. After just a little more than nothing.
You should take a look at France, where a similar approach already costs 50 billion euros. Per year. A lot of money that business and citizens would have to pay in favor of a preferred group – until the price of electricity might drop again at some point. Which, given the snail’s pace at which Germany is expanding renewable energies, could be the end of the world. Both Chancellor Olaf Scholz (SPD) and Finance Minister Christian Lindner (FDP) rightly warn of the risks.
Subsidies distort competition
Of course, an economics minister cannot sit idly by and watch as important parts of industrial value creation migrate. The only question is whether subsidized energy prices are the right way to stop this development? After all, subsidies are not only expensive, they also distort competition to the detriment of those economic sectors that do not receive them.
And: Subsidies cover up the important price signals from the market that force the necessary adjustments – such as reducing energy consumption when it becomes too expensive.
There are financial alternatives, not all are necessarily cheaper, but some are fairer: Instead of using tax revenue to make expensive energy cheaper for a few industrial companies, the government could lower the high taxes and levies on energy consumption. Everyone would benefit, including workers, students, retirees. Corporate tax reform would also be a way. This has been overdue for years.
Ultimately, however, even these measures do not lead to a realization: Germany must expand its energy supply so that prices fall again. And much faster than before. The shutdown of the last remaining nuclear power plants was therefore economically wrong, precisely because the necessary construction of gas and wind power plants is progressing far too slowly. As long as the Federal Minister of Economics does not eliminate these problems, prices will remain high and the location in danger.
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