November 16, 2013

Germany's Chemical Industry Defends Renewable Energy Tax Break

Chairman of German Chemical Industry Association IG-BCE, Michael Vassiliadis, has warned that plans to abolish the renewable energy levy (EEG-Umlage) exemption, currently benefiting energy-intensive companies in the manufacturing industry, will "massively threaten competitiveness and endanger jobs" in Germany.

Alluding to the decision by the former black-yellow coalition Government to significantly extend the tax break in 2011, Vassiliadis pointed out that German industry had not sought such an extension, as it was fully prepared to accept the existing provisions as they stood. In 2011, the Coalition agreed to grant manufacturing companies a 90 percent exemption from the tax, in cases where electricity consumption exceeds 1 gigawatt-hours (GWh), rising to 99 percent tax relief for companies where consumption surpasses 10 GWh. Originally, the legislation provided that only large manufacturing companies, whose electricity consumption exceeded 10 GWh were accorded exemption.

Given the extremely high cost of energy and electricity in Germany, the new Coalition must consider maintaining the tax shelter in special cases, Vassiliadis made clear. Furthermore, the incoming Government must ensure that efforts to improve energy efficiency and to lower electricity consumption, do not simply push companies outside of the scope of the tax break, requiring them to pay the EEG-Umlage in full, he added, insisting that such a situation is "absurd."

Underlining the need to swiftly correct the renewable energy law, Vassiliadis explained that although the legislation was a useful instrument with which to kick-start the energy transition initially, the costs of moving to renewable energy sources have simply spiralled out of control, and the burden on households and on industry must now be contained. A new renewable energy policy must create planning certainty, reduce costs, and be fairer, he emphasized.

Under pressure from Brussels to act, Germany's Environment Minister Peter Altmaier recently confirmed plans to re-examine and to restrict the generous EEG-Umlage tax breaks. Back in July, the European Commission threatened to initiate proceedings against Germany's renewable energy law, denouncing the fact that exemptions from the levy are accorded to energy-intensive companies in Germany, in breach of European Union law.

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