DIW: Germany should avoid subsidising electricity prices for industry, as it would not be effective

According to a report by the German Institute for Economic Research (DIW), the proposed subsidised electricity price for energy-intensive industry would not be efficient for the economy as a whole. Germany’s Ministry for Economic Affairs is pushing for its introduction to help German industry remain competitive as energy commodity prices rise. However, the proposal’s approval remains uncertain amid disagreement over its support within Germany’s governing coalition.

The aim of the industrial electricity price is to boost the international competitiveness of Germany’s heavy industry. Under the proposal by the Ministry for Economic Affairs and Climate Action, energy-intensive companies would receive billions of euros in state aid if they pledge to decarbonise and remain in the country. Industry has welcomed the proposal as a “clear game changer”, but it remains controversial among politicians and economists. It has also come under fire from renewable energy operators, who fear it could jeopardise the expansion of renewables.