Germany and EU Settle Differences Over Green Energy Surcharge

09.04.2014 -

After months of wrangling, Germany and the EU have settled their differences over whether energy intensive companies can remain exempt from paying a surcharge to support the country's s drive to increase the share of renewables in the energy mix.

The outcome was called a compromise, but the terms of the agreement suggest that Germany emerged the winner.

After initiating proceedings against Europe's most populous and powerful industrial state, EU authorities this week backed down and agreed that all but 400 of the nearly 2,000 companies currently exempted from the surcharge can retain this status, provided they consume large amounts of energy and face international competition. At stake was a sum of around €5 billion.  

Non-industrial consumers will continue to pay 6.3 cents per kilowatt-hour on top of their regular bills.

EU environment commissioner Joaquin Almunia had previously argued that the exemptions gave German industry an unfair advantage over companies in other member states, while Germany asserted that some 800,000 jobs would be at risk if industry had to pay the surcharge.

The chemical industry warned repeatedly - and, as it turns out, successfully - against cancellation of the exemption for self-generated energy on companies production sites.

BASF's CEO Kurt Bock had asserted that the world's largest chemical group could face around €400 million in additional costs annually, at its massive Ludwigshafen site alone, if forced to bear the full brunt of the renewables surcharge.

Bayer's CFO Werner Baumann calculated that the loss of the exemption would increase the group's annual energy bill of €172 million, with Bayer MaterialScience most severely affected.

BASF and Bayer, along with all other chemical companies generating their own energy, will now be able to hang on to their full exemption. In an industry with where most large producers are engaged in international competition, most companies stand to profit.

Even the 400 industrial firms - in all fields - that lose some of their exemption will not pay more than 20% of the surcharge.  Private households will continue to shoulder the full load, although, due to their lower consumption, individual contributions stand to be smaller.

Federal economics minister Sigmar Gabriel said households currently pay some €8 billion toward the green surcharge annually, with industry contributing about €7.4 billion. In future, the distribution will be similar, he added.  

The German chemical industry association Verband der Chemischen Industrie (VCI), which lobbied vigorously for retention of the exemptions, was pleased with the outcome of the long-running discussion. Managing director Utz Tillmann called it "an important political success" that will secure many jobs in Germany's third largest industry.

Michael Vassiliadis, chair of the chemical workers union IG BCE, termed it "a positive signal for industry employees."

BUND, the German affiliate of Friends of the Earth, was less enthusiastic, saying that by allowing energy-intensive companies to retain special privileges, the German government was indirectly subsidising industry.

The Germany-EU agreement must be passed separately by the German parliament, the Bundestag, as it came too late to be included in the bill regulating renewable energy sources. A vote is scheduled for May.