The relief announced by the Chancellor is in danger of failing given the strained budget situation. The think tank Epico sees an opportunity to implement it anyway.
Federal Finance Minister Lars Klingbeil emphasizes that permanent financing of the electricity tax reduction from current growth is not secured.
The think tank Epico proposes using the European Investment Bank (EIB) for so-called front-loading to bring forward climate investments and thereby enable electricity tax cuts.
Germany is currently not using the EIB's front-loading funds, which could provide up to six billion euros. Direct tax financing from this is excluded under European law.
Epico boss Bernd Weber calls for national investments in building efficiency and electromobility to be financed with EIB funds in order to free up budget resources for electricity tax relief.
Berlin. The surprising announcement by Chancellor Friedrich Merz that he would support a reduction in electricity taxes for all electricity consumers was quickly followed by disillusionment.
Federal Finance Minister Lars Klingbeil (SPD) stated that he had nothing against this demand, but that it had to be financeable. “We are pleased that growth is back,” said Klingbeil. “But I cannot confirm today the assumption that this could be used to permanently finance a reduction in electricity taxes.”
Does this also mean that the electricity tax cut is no longer applicable for everyone? The think tank Epico sees a way to implement the tax cut despite tight budgets. The European Investment Bank (EIB) is providing billions of euros to pre-finance climate investments. The income that will be generated in the future from emissions trading for the transport and buildings sectors will serve as security.
Experts call this mechanism “front loading”. The idea behind this is that although European emissions trading for the transport and building sectors is not due to start until 2028, EU states can already financially support adaptation measures today, such as increasing energy efficiency in the building sector or switching to electric cars. Germany has not yet used the EIB's front-loading funds.
Bernd Weber told the Handelsblatt: “Germany should lead the way and use future income today to enable investments, relieve the burden on households and thus increase the acceptance of CO2 pricing.”
In Germany, a CO2 price has been levied in the transport and building sectors since 2021. This is regulated in the Fuel Emissions Trading Act (BEHG). The German CO2 price will later be replaced by European emissions trading for both sectors.
The reduction in electricity tax has great symbolic significance. When the coalition had to admit last year that it would not be able to implement the reduction for all consumers promised in the coalition agreement, it was exposed to heavy criticism. Due to tight budget resources, it limited itself to expanding and later perpetuating the existing tax relief for the manufacturing sector as well as agriculture and forestry.
The EIB has already provided three billion euros for frontloading. If necessary, the volume can be increased to six billion euros. A reduction in electricity tax for private households and all companies to the European minimum level would cost around an additional 5.4 billion euros annually. Epico boss Weber is promoting using the money to reduce electricity taxes. However, this would require a detour. The reason: Direct financing of tax cuts from front-loading funds is not possible according to European requirements.
Germany could finance appropriate investments in building efficiency and electromobility through the EIB's frontloading instrument. If previously nationally financed, eligible investments were to be carried out via frontloading, there would be scope in the federal budget that could be used to reduce the electricity tax burden.
“Reducing electricity taxes means strengthening purchasing power, enabling investments and reducing import dependencies,” said Weber. The reduction must not fail again due to financing.
By bringing forward future revenue from CO2 pricing for buildings and transport, there is a concrete solution to the deadlocked budget situation. “Climate investments can be pre-financed at European level and create room for maneuver in the budget, without additional funds and new distribution battles over cuts,” said Weber. All that is needed is the political will to use this solution.
