German economy minister: Financing energy price caps under threat

A ruling by Germany’s constitutional court that the transfer of 60 billion euros (1.47 trillion Kč) to the climate fund was unlawful threatens the future of regulated electricity and gas prices, which would mean higher bills for consumers. Federal Economy Minister Robert Habeck said this today in an interview with German radio station Deutschlandfunk. The constitutional court ruled the transfer of money to the climate fund unconstitutional last Wednesday, a week ago. The money had originally been borrowed for the 2021 budget but remained unused. The federal government is now short of 60 billion euros in its budget and cannot use the funds. The government is assessing the extent of the ruling’s impact.

“If a crisis were to occur, the federal government would no longer be able to finance the gas and electricity price caps. Gas prices, electricity and district heating prices would rise significantly,” Habeck said of the possible impact of the constitutional court ruling.

Germany introduced so-called price caps on district heating, electricity and gas this January in response to a sharp rise in energy prices. They will remain in force until the end of April next year. Households and small and medium-sized businesses pay suppliers 12 cents (2.94 Kč) per kilowatt-hour for natural gas and 9.50 cents (2.45 Kč) for heat, for up to 80 percent of their average annual consumption last year. Households and small and medium-sized businesses pay 40 cents (9.80 Kč) per kilowatt-hour for electricity, for up to 80 percent of their average consumption last year. Large industrial companies also receive relief, with the lower prices applying to up to 70 percent of their consumption: seven cents (1.70 Kč) per kilowatt-hour for gas and 13 cents (3.20 Kč) for electricity.

Thanks to the general fall in market energy prices, the cap probably makes little difference to most households at present, but it provides a safeguard against possible further fluctuations. However, funding for the cap could be at risk because, according to Habeck, the ruling also affects the government’s stabilization fund, which pays for it.

A government spokesperson said at the regular press conference today that, in response to the constitutional court ruling, Chancellor Olaf Scholz’s cabinet is reviewing the financing of all the special funds established by the government. The spokesperson also said it was unclear what financial impact the ruling would have on the budget.

The constitutional court ruled that the government cannot use the 60 billion euros transferred to the climate fund. It also found that commitments already approved from this sum must be covered by other means.

The 60 billion euros in question was originally part of the approved borrowing for the 2021 budget to offset the effects of the Covid-19 pandemic, but Germany did not use the money. Scholz’s government therefore decided to transfer the sum to the climate fund. The opposition conservative alliance CDU/CSU challenged the move in court, arguing that it circumvented the debt brake. The opposition said at the time that the problem was not that the borrowed money had gone to the climate fund, but rather the budgetary measure by Finance Minister Christian Lindner, who used the authorization to borrow for an entirely different purpose.