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17 Aug 2022, 15:01
Hannah Naylor

German gas levy to cause great financial difficulties for households and industries - associations

Clean Energy Wire / n-tv

The new gas levy announced this week of 2.4 cents per kilowatt hour, to come into force from October, has sparked backlash from households and industry, which fear the higher costs on top of already high energy prices will cause financial difficulties for the former and production cuts for the latter. The levy will likely raise the inflation rate by almost one percentage point by the end of the year, and based on the year 2023 households will be deprived of 8 billion euros in purchasing power – equivalent to 0.4 percent of their disposable income, Stefan Kooths, vice president of the Kiel Institute for the World Economy (IfW), said in an online statement. However, he also said the levy was necessary to avoid the risk of insolvencies, which could then force customers to conclude new contracts with “much higher daily prices.”

Social welfare associations have warned of a poverty spiral that may include loss of housing if compensatory measures are not implemented quickly. “What is needed here is not a relief package for all, but a large package for the poor,” n-tv news quoted the chief executive of charity Deutscher Paritätischer Wohlfahrtsverband. The Federation of German Industries (BDI) said that the costs of the levy will overwhelm many companies, with some of them likely be forced to limit production or abandon it altogether. “Business now needs clarity quickly on the relief measures announced, otherwise there is a threat of a cascade of plant closures and production stops,” Peter Adrian, president of the Association of German Chambers of Industry and Commerce (DIH).  The BDI has called for the levy to be stretched over a longer time period, through 2024, to lessen the immediate economic damage to companies. The Chemical Industry Association (VCI) has advocated for similar measures alongside government subsidies, but insists that the levy is necessary.

The new gas levy was announced earlier this week, sparking concerns about even higher inflation. The German government has warned of a hard winter ahead, whether or not gas supplies continue to dwindle, as the energy crisis that has engulfed much of Europe continues to cause price spikes.

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