European Commission allows Germany to support industry through two energy support schemes

Germany has secured European Commission approval to temporarily expand support for energy-intensive industry. During 2026, companies will be able to receive both electricity price support and compensation for the indirect costs of emissions trading. The German government hopes the measure will strengthen the competitiveness of an industry that has faced high energy prices, weak demand and growing pressure from foreign competitors in recent years. Critics, however, point out that this is only a short-term fix with no long-term strategy.

The German government has reached an agreement with the European Commission that will allow energy-intensive businesses to use two major state support schemes at the same time in 2026. The measure was announced by German Economy Minister Katharina Reiche in an interview with Handelsblatt.

Until now, businesses had to choose between compensation for the indirect costs of the EU ETS and support in the form of preferential industrial electricity prices. They will now be able to use both mechanisms simultaneously throughout 2026. According to Reiche, the European Commission accepted the German government's argument that exceptional circumstances in energy markets require additional support for industry.

“The Commission accepted our argument that this step is necessary given the extremely high energy prices caused by the current crisis,” the minister said. She was referring to rising energy prices linked to geopolitical tensions in the Middle East.

According to federal government estimates, expanding the support will require additional spending of around one billion euros. The rules will become stricter from 2027, however. Businesses will only be able to use both support mechanisms at the same time if they apply them to different production processes.

German industry has been under considerable pressure in recent years. Production in energy-intensive sectors such as chemicals, metal manufacturing and building materials has yet to fully recover from the energy crisis of 2022 and 2023.

According to Germany’s Federal Statistical Office, Destatis, industrial production remains below its pre-crisis level, and businesses face a combination of high energy costs, weak domestic demand and intensifying competition, particularly from Asia and the United States.

The aim is to bridge the period of high electricity prices

Support for industrial electricity prices is one of the key tools of German energy policy. The government argues that energy-intensive businesses need help bridging the period of high electricity prices until the effects of large-scale renewable energy development and grid modernisation take hold.

Not all experts consider this approach optimal, however. Julia Bläsius, director of the Agora Energiewende think tank, described industrial electricity pricing as a suitable short-term tool that cannot solve the structural problems facing German industry in the long run. In her view, it offers only limited assistance, with no major impact on the economy’s competitiveness.

“An industrial electricity price is a good measure for providing short-term relief to businesses. In the long run, however, it is just a drop in the ocean,” Bläsius told Handelsblatt.

According to the Centre for European Economic Research (ZEW), subsidies will be most beneficial to large industrial companies. Analysts say small and medium-sized businesses may struggle with the administrative complexity of the schemes, limiting their ability to make effective use of the support.

The European Union is also taking action

German industry associations have previously criticised the European Union’s conditions for member states seeking to subsidise electricity prices for industrial businesses, arguing that they are too strict and insufficient to secure the bloc’s industrial future.

In March, the European Commission presented a draft law known as the Industrial Accelerator Act, which is intended to help energy-intensive sectors and clean technology manufacturers withstand growing pressure from global competitors, particularly the United States and China.

Germany’s move can therefore be seen as another part of the European debate on how to reconcile industrial decarbonisation with maintaining competitiveness. While the German government is relying on temporary financial support, many experts point out that a long-term solution will primarily require an adequate supply of affordable carbon-free electricity, grid development and faster permitting for new energy projects.