German coalition fails to agree on electricity tax cut for households, talks continue

Germany’s coalition government has failed to agree on cutting the electricity tax for households and small businesses in next year’s budget, leaving a central promise to ease energy costs unfulfilled for now, news magazine Der Spiegel reported. Leaders of the parliamentary groups of chancellor Friedrich Merz’s conservative CDU/CSU alliance and the Social Democrats (SPD) confirmed that no way had been found to pay for the measure, which would cost the state around five billion euros a year. 

“So far, we have not managed to find the corresponding funding in the budget,” said Thorsten Frei, head of the CDU/CSU parliamentary group, adding that the electricity tax cut remained his group's “top priority”. Conservative lawmakers told Der Spiegel that talks were continuing and that a cut limited to a certain period was still possible.

While many large industrial consumers pay lower electricity rates, household electricity prices in Germany are among the highest in the world, with a large share of the price made up of taxes, levies and other politically determined components. The electricity tax for households in Germany currently stands at 2.05 cents per kilowatt-hour, while the EU minimum level is 0.1 cents. 

Contrary to its promise in the coalition agreement, the government last year limited an electricity tax cut to selected sectors of the economy, arguing that the tight budget situation would not allow for broader relief. Merz said in October, after heavy CDU losses in state elections, that his party wanted to use “leeway” in the budget to cut the tax for all, acknowledging that the promise had yet to be kept. “We not only want to offer financial relief but also close a gap in our credibility,” Merz said at the time.

Supporters of a broad cut, including consumer groups and business associations, argue it would also help climate action because cheaper power makes electric cars, heat pumps and other electric technologies more competitive with fossil fuels. Peter Adrian, head of the German Chamber of Commerce and Industry (DIHK), said that failing to agree on the electricity tax cut yet again amounted to a "bitter disappointment for companies in Germany." Instead of receiving financial relief, companies would have to put up with lower state support for grid fees. "The zigzag on constantly making new promises and backtracking again is undermining trust in the government," Adrian added. 

According to price comparison website Verivox, the reduction would save an average three-person household about 93 euros per year, equal to lowering household electricity bills by about seven percent.

SPD parliamentary group leader Matthias Miersch said the measure’s cost was high while the relief was small. His party instead favours a cap on fuel prices, which it says would cost the state nothing, as the coalition looks for ways to ease energy costs once a fuel tax rebate expires at the end of the year.