December 24, 2013

Merkel Challenges EU On Renewable Energy Tax Break

On a confrontation course with Brussels, German Chancellor Angela Merkel has pledged to defend the renewable energy tax (EEG-Umlage) rebate currently benefiting energy-intensive companies in Germany.

The European Commission has announced plans to launch an in-depth investigation to determine whether or not the EEG-Umlagereduction, granted to energy-intensive businesses, is compatible with European Union (EU) legislation. Opinion in Germany is divided. Critics insist that following a recent extension of the tax break, the measure now benefits companies even though they are not facing tough international competition.

The figures speak for themselves. This year, around 1,700 companies are due to take advantage of the rebate, soaring to approximately 2,800 next year.

Chancellor Merkel emphasized that both she and the German Energy and Economy Minister Sigmar Gabriel intend to make very clear to the European Commission that Germany wishes to remain a strong industrial location. Germany needs competitive companies, she argues.

Given that this issue concerns companies, it therefore also concerns jobs, Chancellor Merkel stressed. Although the German Government aims to work closely alongside the Commission, it will nevertheless underline at the same time that Europe will not be stronger if jobs are endangered in Germany.

Chancellor Merkel alluded to the fact the EU Energy Commissioner Oettinger is to submit a report to the European Council in February, listing all the subsidies that are currently accorded in Europe to compensate for electricity prices. She warned that as long as there are countries in Europe where power for industry is cheaper than in Germany, there is no reason to consider that Germany is "contributing to a distortion of competition."

Under the Renewable Energy Law, as amended in 2012 (EEG-Act 2012), energy-intensive industries are granted reductions on the EEG-surcharge.

The Commission also intends to investigate the reduction on the EEG-surcharge granted when a supplier sources 50 percent of his electricity portfolio from domestic renewable electricity ("green electricity privilege").

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