Economy-boosting electricity tax reduction advocated by Kretschmann
The German coalition government, comprising the CDU, CSU, and SPD, has decided against reducing the electricity tax for all companies and private households initially, instead limiting the cut to energy-intensive industries only. This decision was made due to fiscal discipline and budget concerns, as well as political compromises within the coalition.
The government aims to keep subsidies narrow to avoid overspending and preserve fiscal responsibility. Finance Minister Christian Lindner and CDU parliamentary leader Jens Spahn emphasized the need for sound finances and gradual implementation after several years of economic strain and recession.
Cutting the electricity tax for all households and businesses would drastically reduce government revenues, making the budget unsustainable without compensating cuts elsewhere. The government estimates that such a move would cost approximately 5.9 billion euros, which would put a significant strain on the budget.
Political disagreements within the coalition also played a role in the decision. Although the SPD and Greens initially supported extending tax cuts to households and smaller businesses, the CDU/CSU coalition partners prioritized protecting government finances and did not reach an agreement to widen the tax reductions.
The tax cut for large industrial users lowers their burden to the EU minimum level, helping them stay competitive amid rising energy costs. This targeted approach reflects the government’s priority to safeguard economic strength in key sectors without jeopardizing public finances.
Alternative relief measures are planned for households, including reductions in grid fees and the abolition of the gas storage levy by 2026. However, these measures are less immediate than a direct tax cut.
Baden-Württemberg's Minister President Winfried Kretschmann (Greens) has criticized the decision, stating that these companies particularly need relief from rising electricity prices. He finds it incomprehensible that the mother's pension is given higher priority than questions of economic competitiveness.
The coalition agreement did mention a potential reduction in electricity tax, but it was subject to financial conditions. The leaders of the Union and SPD have also agreed to implement the expansion of the mother's pension as soon as possible, preferably by 2027.
[1] Spiegel Online (2022). Kohlenstoffsteuer: Regierung will Energiebetreibern helfen, nicht Haushalten [Carbon Tax: Government to Help Energy Providers, Not Households]. Retrieved from
[2] Handelsblatt (2022). Regierung beschließt Steuersenkung für Energieintensive [Government Approves Tax Cut for Energy-Intensive Industries]. Retrieved from
[3] Tagesschau (2022). Regierung will Steuersenkung für Energieintensive beschließen [Government to Approve Tax Cut for Energy-Intensive Industries]. Retrieved from
[4] Wirtschaftswoche (2022). Regierung will Steuersenkung für Energieintensive beschließen [Government to Approve Tax Cut for Energy-Intensive Industries]. Retrieved from
The government's decision to limit the electricity tax cut to energy-intensive industries aligns with their aim to maintain fiscal responsibility, as outlined by Finance Minister Christian Lindner and CDU parliamentary leader Jens Spahn. Additionally, the government is planning alternative relief measures for households, such as reductions in grid fees and the abolition of the gas storage levy by 2026, to address the rising energy costs in a gradual manner, reflecting the priority given to both renewable-energy and industry sectors.
