Last updated: December 18, 2013 12:32 pm

Angela Merkel vows to fight EU energy subsidy probe

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Angela Merkel on Wednesday vowed to defend industry in Germany against an investigation launched by Europe’s top competition regulator into the state discounts hundreds of companies receive for renewable energy surcharges.

The German chancellor warned Brussels that the probe, which could force the companies to pay back billions of euros, would put at risk jobs and the industrial competitiveness of Europe’s largest economy.

“We will make it very clear to the [European] Commission, Germany wishes to retain a strong industrial base. We will make it clear that Europe is not strengthened when jobs in Germany are threatened,” she said in combative remarks to the Bundestag.

The EU antitrust watchdog said on Wednesday that it would examine whether the reduction granted to energy-intensive companies on a surcharge for the financing of renewable energy sources in Germany is compatible with EU state aid rules.

The affected companies include BASF, ThyssenKrupp, Bayer and Linde.

“The reductions seem to give the beneficiaries a selective advantage that is likely to distort competition within the EU internal market,” the commission said. “The current state aid guidelines do not foresee the possibility of such reductions.”

The commission added that it will also probe tax discrimination complaints, as Germany’s energy policy only offers support for companies using domestic green energy and not imported renewable power.

Under EU law, if investigators determine that German companies received illegal state aid they will be forced to pay back the financial assistance to the government. The surcharge exemptions were worth about €4bn to energy-intensive companies this year, up from €2.3bn in 2012, according to official data.

Ms Merkel challenged the commission’s allegations: “I’ll say this quite simply: so long as there are European countries where industrial electricity is cheaper than in Germany, I can’t understand why we contribute to the distortion of competition.”

German’s new coalition government is planning to review exemptions that have shielded heavy industry from the cost of the switch to renewable energy. However, it is more likely to trim exemptions than scrap them altogether.

The energy price waivers are intended to shield internationally competitive companies but have grown. A total of 1,716 companies were granted waivers this year, compared with 570 in 2010.

The Federation of German Industries said the outcome of the energy investigation would have a “significant impact” on the country’s industrial base. Ulrich Grillo, the federation president, said in a statement: “The removal of exemptions for energy-intensive industry would be the immediate end for many businesses and thousands of jobs.”

The federation said the exemptions were essential to maintain a level international playing field for German industry. German manufacturers fear the loss of energy price discounts will leave them unable to compete with US rivals who are benefiting from the shale boom.

Mr Grillo urged the German government to clear up concerns about state aid in its proposed reform of Germany’s renewable energy legislation.


Letter in response to this report:

Clamp down on insidious German fuel subsidies / From Prof Simon J Evenett

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