A winter gas surcharge, which will come into effect in October for German households and businesses, was set at 2.4 euro cents per kilowatt hour on Monday.
Gas prices have been driven up in no small part because of Russia’s invasion of Ukraine, prompting market concerns about energy security and also shortfalls in deliveries in some cases.
So far, consumers have been largely shielded from the increases, with companies unable to pass on their increased costs, but that is about to change.
The decision on the amount of the levy fell to the company charged with overseeing and coordinating the German gas market, Trading Hub Europe. The government had already indicated the rate should probably lie between 1.5 cents and 5 cents, however.
The stated aim of the levy is to cover around 90% of the additional costs incurred by gas providers who are now paying higher prices to secure gas, in some cases from new sources other than Russia.
Just under half of German households are heated using gas, the most popular method by far in the country.
German dependence on Russian gas has become notorious this year amid the war in Ukraine, both for household power and for industry.
Government seeks sales tax exemption
Finance Minister Christian Lindner has already said he aims to soften the blow by appealing in Brussels for the right to waive sales tax on the new gas levy. Doing this would require the green light from the EU.
“That will make a difference for people,” Lindner said.
The head of the German Association of Energy and Water Industries, Kerstin Andreae, argued that this did not go far enough. She told public broadcaster ARD it would be better to try to secure the reduced sales tax rate of 7% for all gas payments, saying that relief for consumers was “essential.”
Economy Minister Robert Habeck has estimated that the levy will end up costing “several hundred euros per household” annually.
For a four-person household, the increase should mean an additional roughly €480 per year, excluding sales tax.
Fairness and effect on inflation questioned
Business-focused newspaper Handelsblatt on Monday featured a study from an economic institute with close ties to German trade unions. According to the Institute for Macroeconomics and Cyclical Analysis, the gas levy could end up accelerating inflation rates by as much as 2%, bringing them closer to 10%.
Commerzbank’s chief economist Jörg Krämer also considered increased inflation likely as a result.
“Coupled with the expiry of the 9-euro [public transport] ticket and the discount at filling stations, this could push the inflation rate over 9% in October and November. It’s an enormous reduction in purchasing power for consumers,” Krämer told Reuters news agency.
Germany, like many western economies, is facing its first period of rapid inflation in decades, with the most recent figures showing a slight dip to 7.5% year-on-year in July.
The leader of Germany’s socialist Left Party, Dietmar Bartsch, railed against the plan in a Monday newspaper interview. Bartsch called the levy an “impoverishment program for many people,” and argued that the government should cover any additional costs with the “rapidly rising sales tax revenues.” He also called for a bid to cover the increased costs in what he considered a more equitable manner.
“It is irresponsible of the government that no effort is made to check what financial situation the consumers are in, instead approving this blanket levy for everybody,” Bartsch told the RND network of newspapers.
msh/rt (AFP, dpa, Reuters)
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