Europe Endless is a blog covering the European Union. It has a slant towards the UK and Germany.

Controversy over Germany's renewable energy industry exemptions

+ No comment yet

The driving force behind Germany's Energy Transition is the Renewable Energy Law (Erneuerbare-Energien-Gesetz). This adds a levy on top of consumers' electricity bill to support renewable energies. It has been seen by some, such as Fritz Scharpf as a success story for "positive" EU integration, paving the way for other countries to implement similar schemes, without receiving reprisals by the Commission. The law's legitimacy was proved in 2001, when the subsidy aspect of the levy attracted the attention of the EU Commission under competition law. The political scientist Fritz Scharpf said that the law, in the Commission's eyes, was about as "bad as it could be", as it "amount[ed] to a restraint to trade... [and] discriminates against foreign suppliers", but despite this, the ECJ ruled in its favour (C-379/98). Germany's Renewable Energy Law showed that the EU's environmental commitments could take priority over competition concerns.


Industry exemption

One aspect of the Renewable Energy Law, however, has remained controversial. This is Section 41, which allows certain companies to apply for an exemption from the green levies. The industry argument is that that the high electricity price would drive up manufacturing costs and threaten the competitiveness of Germany's exports.

In 2013, 1,716 firms received exemptions. The German Greens brought the exemptions into public debate, as not only the "traditional" heavy industries received exemptions, but also slaughterhouses and stocking manufacturers. There were many Germans who supported the Energy Transition, but didn't like the idea that they were subsidising companies, especially when it conflicted with their other environmental or ethical commitments.


Even among those with no particular ethical stance, there was still the idea that the burden of Germany's Energy Transition was falling unfairly on private citizens. Currently, private citizens contribute 7,2 billion euros to the Energy Transition, compared to the 6,1 billion contributed by industry. The Süddeutsche Zeitung has called this imbalance "unfair", as industries are seen as benefitting from the new sources of green energy paid for by the public. The German Association of Energy and Water Industries calculated that without industry-exemptions, the total cost of the Energy Transition would fall by 1,3 billion euros.


The exemptions become even more unfair considering the additional fact of lowering wholesale electricity prices. The increase in renewable electricity sources has lowered and levelled out the spot-market price for electricity in Germany. This means that industries with levy exemptions receive a net gain for the Energy Transition in the form of lower electricity prices. It is easy, therefore, to see how the industry exemption could be seen as unfair, but also as an indirect state subsidy.


Investigation by the EU Commission

The combination of exemptions and cheaper energy has meant that the Renewable Energy Law has once again attracted the attention of the Commission. There is a big difference between honouring environmental commitments and giving Germany's industry a free ride. The Süddeutsche Zeitung, however, suggests that the Commission and the German government have been in cahoots over the industry exemptions.

According to an inside source, the "Commission wanted to wait until the government had released the exemptions at least for 2014", which has allowed German industry another full year of exemptions. The Süddeutsche Zeitung says also that the Commission originally wanted to investigate the exemptions in summer, but proceedings were shunted back, thanks to Angela Merkel leaning on Commission President José Manuel Barroso.


This apparently explains why it has taken until December 2013 for the EU Competition minister, Joaquin Almunia, to open an investigation. Angela Merkel has already responded with concerns of a "dramatic effects on German industry", even though any outcome is likely to be quite far away.


Are industry exemptions necessary?

In the meantime, other Member States perhaps wouldn't mind seeing German industry work a little harder to keep their standing in terms of international competitiveness. However in the long-run, both private consumers and German industry are likely to benefit from the Energy Transition.


The reason is that much of the present cost of the Energy Transition is servicing the generous 20-year contracts, which were offered to encourage new green technologies such as solar. As these technologies have become cheaper, the cost of the Energy Transition should decrease as the 20-year contracts run out. This may possibly eliminate the rationale for industry exemptions in the first place, perhaps even before the Commission makes a ruling against the German exemptions policy.

Your Ideas for Europe: Banks

+ No comment yet
October to September is single market month at Your Ideas for Europe. You can contribute ideas, which will be discussed in online by MEPs, organisations and businesses. From 7-9 October, the focus is on banking reform. Ideas are supposed to be "innovative and feasible," but it seems like this isn't such a strictly enforced rule, for example with "Nationalize all the banks in EU!"

Read more +

The case for a European Supergrid

+ No comment yet
Power lines in East Anglia
The modern day European Union evolved from an industrial energy project. In 1951, Robert Schuman proposed that the coal and steel of the Ruhr district should come under a common European control, so that the resources could no longer be used by one country to wage war. As intermittent renewable energy technologies supply an ever-increasing part of Europe's energy demands, the EU must once again coordinate efforts to ensure future energy security.

Read more +

The ECB, Sovereign Debt, and a Karlsruhe Constitutional Challenge

+ No comment yet
In June, the German Constitutional Court was in session to rule whether Mario Draghi's assurance in 2012, that the ECB would buy debt from the states of the EU, is legal in terms of the German Constitution—not to mention the Lisbon Treaty. The case has been described as the "most comprehensive Constitutional challenge in history, with the support of more than 35,000 complainants." Read more +

"Giant step forward" in Clinical Trial Transparency 2012/0192(COD) COM(2012)0369

+ No comment yet
A while ago I covered the Commission's proposal to introduce a new regulation governing clinical trials  to replace Directive 2001/20/EC, and the importance of open access to trial data. While the proposal appeared to be committed to open access to trial data in the preamble, Article 78 included a loophole that would allow companies to withhold data if it was deemed "commercially confidential", once again handing control of data back to companies.
Read more +

Corporate Tax Avoidance in the EU

+ No comment yet
Euro change flag

Multinational corporate tax avoidance has been a dominant feature in the UK media for the last few months, with high profile companies such as Google, Amazon and Starbucks being grilled before the Public Accounts Committee. The committee can’t make them pay any more tax, as tax avoidance is not illegal (unlike tax evasion), but they have done is expose tax avoidance to the general public. This article looks at what ideas at the EU level are being developed to either stop multinational corporate tax avoidance or make it more difficult.


Read more +