Germany’s Electricity Ecotax Exemptions Are Not Illegal State Aid

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Originally published on Lenz Blog.

Here is yet another reason why the reductions German energy intensive industry gets when paying surcharges are not subsidies, and therefore none of the EU Commission’s business.

In more enlightened times, when the Green Party was part of the German government, Germany adopted an ecotax. The idea of that law was to make electricity more expensive. For that purpose, the Electricity Tax Act (Stromsteuergesetz) adds a tax of 20.5 euro per MWh (2.05 cents euro per kWh).

Energy intensive industry gets a reduction of up to 90% of that tax under Article 10 of the Act. And this Article has been changed substantially with effect from 2013. That reform was based partly on an agreement between German industry and the German government of August 1st, 2012.

In that agreement, German industry promises to further reduce energy intensity, by an average of 1.3% each year. The first year this applies is 2015, and the requirement is a reduction of 1.3% compared to the average of the years between 2007 and 2012. Then the goals are 2.6% for 2016, 3.9% for 2017, and 5.25% for 2018.

In consideration, the German government promises to continue the system of tax reductions.

Both parties agree to monitor the results of these efforts by industry, and each pay half of the costs for that monitoring. Professor Frondel at the RWI has secured the project to do this monitoring.

The background to this reform was the fact that the European Commission decided in 2007 that these reductions are not illegal state aid under EU rules (State aid No N 775/2006 – Germany). But that decision was limited until the end of 2012. People thought that without a new system these reductions might disappear completely from 2013 on.

So what has the EU Commission to say about these new rules? Is there any new decision extending the 2007 decision?

I don’t exactly know. The German government has notified the Commission that these measures are not illegal state aid under the General block exemption Regulation 800/2008. That means that the conditions in Article 3 of the reform law are fulfilled and the new law took effect from 2013 on.

I think this is an excellent model to deal with the illegal Commission power grab regarding German feed-in tariff law. Just notify under Regulation 800/2008 that whatever results from the normal democratic legislation process is not illegal state aid under that Regulation. Then wait if the Commission raises any objections, and fight them vigorously once they come.

In contrast, the model economy minister Gabriel has in mind would give the Commission veto power over the result of the German legislative process. I for one don’t think that is appropriate when the legislation in question has nothing to do with state aid in the first place, and is therefore none of the Commission’s business.


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Dr. Karl-Friedrich Lenz

is a professor of German and European Law at Aoyama Gakuin University in Tokyo, blogging since 2003 at Lenz Blog. A free PDF file of his global warming science fiction novel "Great News" is available here.

Dr. Karl-Friedrich Lenz has 67 posts and counting. See all posts by Dr. Karl-Friedrich Lenz