Gas surcharge in Germany: harmful, unjust, and avoidable

_ Yuri Kofner, economist, MIWI Institute. Guest contribution for the Austrian newspaper Tagesstimme. Munich – Graz, August 1, 2022.

Imminent gas shortage

Since May 2021, the average gas exchange price in Europe has increased almost tenfold from 25 euros per kWh to over 200 euros in July 2022.[1]

Due to the energy transition and reduced gas supplies from Russia (now only 20 percent of the throughput capacity of Nord Stream 1), leading German research institutes expect a gas gap in Germany of around 70 TWh in spring 2023. This will entail a forced shutdown of domestic industry with a loss of value added of around 137 billion euros (3.8 percent of GDP).[2]

According to this, the German gas storage facilities can only be filled up to 60-70 percent by November 1, 2022, although by law they must be 90 percent full, otherwise there is a risk of high fines.

In order to reach the target, importers will have to buy gas from other countries, e.g., LNG tanker gas from the USA – but of course at significantly higher prices.

Immense additional costs

In order to finance this delta, the green Minister for Economic Affairs, Robert Habeck, has now announced a new gas levy, which is intended to pass on 90 percent of the increased replacement procurement costs to consumers. It is to apply to all gas consumers from October 1 of this year until March 2024.[3]

Habeck named the potential price range of the surcharge between 1.5 and 5 cents per kWh and expects additional costs for households of several hundred euros per year. Chancellor Olaf Scholz (SPD) gave more specific figures of 200 to 300 euros for a family of four.[4]

According to the MIWI Institute’s own calculations, the average German household will have to pay between 370 (1.5 cents levy), 500 (2 cents levy) and up to 1,230 euros (5 cents levy).

I would not deny that the large utility companies need support in the current situation in order to guarantee energy security. But the fact that the traffic light government, instead of relieving the population of the exploding energy prices, has now decided that ordinary citizens and companies will have to bear the increased additional costs is outrageous. During the current economic crisis and inflation of almost 8 percent, this borders on the deliberate destruction of wealth.

Alternative funding sources

According to calculations by the MIWI Institute, the gas replacement procurement costs will total around 7.7 to 25.7 billion euros in 2022. If the government wanted to, it could cover this sum relatively easily from its own budget. For example, from the 48 billion euros in the dissolved asylum reserve or from the so-called climate and transformation fund, which currently totals over 85.3 billion euros.[5]

Other potential sources of savings are Germany’s annual net transfers to the EU of around 18 billion euros annually[6] or asylum expenditure of 27.4 to 35.6 billion euros (without taking social benefits into account).[7]

According to Peter Boehringer, the budget spokesman for the AfD parliamentary group in the German Bundestag, the savings potential for useless ideological expenditure and subsidies in the federal budget is around 20 percent, which corresponds to around 90 to 100 billion euros in 2022 and 2023.

Even relief would be possible

Capping the price of gas by having the costs covered by the state budget would therefore only be a question of political will. But obviously the green ideologized federal government wants fossil fuels to become more expensive – at the expense of ordinary citizens and companies.

On the contrary, a blue AfD government could not only cap the gas price by dissolving the climate and transformation fund, but also subsidize it and relieve every household by 130 to 1,000 euros per year.

Notes

[1] Trading Economics (2022). Natural Gas EU Dutch TTF (EUR/MWh). URL: https://tradingeconomics.com/commodity/eu-natural-gas

[2] Gemeinschaftsdiagnose (2022). Zur Gefahr einer Gaslücke in Deutschland bei einer

Drosselung russischer Lieferungen auf 20 Prozent. URL: https://gemeinschaftsdiagnose.de/wp-content/uploads/2022/07/Gemeinschaftsdiagnose_Sonderauswertung-Gasluecke_Juli-2022.pdf | Gemeinschaftsdiagnose (2022). On the Threat of a Gas Gap in Germany in the

Event of a Suspension of Russian Deliveries. URL: https://gemeinschaftsdiagnose.de/wp-content/uploads/2022/07/JointEconomicForecast-SpecialReport-GasGapGermany-June2022.pdf

[3] Tagesschau (2022). Gasumlage wohl ab Oktober bis 2024. URL: https://www.tagesschau.de/wirtschaft/gas-umlage-101.html

[4] Tagesschau (2022). Was auf Gaskunden zukommt. URL: https://www.tagesschau.de/wirtschaft/verbraucher/gasumlage-gaspreise-wirtschaftsminister-haushalte-familien-mehrkosten-gasrechnungen-101.html

[5] Hüther M., Obst T. (2021). Ist die Einheit des Budgets noch gewährt? IW Köln. URL: https://www.iwkoeln.de/studien/michael-huether-thomas-obst-ist-die-einheit-des-budgets-noch-gewahrt.html | Schmidt M. (2021). 60 Milliarden fürs Klima. Stuttgarter Zeitung. URL: https://www.stuttgarter-zeitung.de/inhalt.60-milliarden-fuers-klima-lindner-macht-sich-locker.82d32cc9-ffde-403b-bb54-e4399d861523.html?reduced=true

[6] Kofner Y. (2021). Welfare effects of DEXIT: Deutschmark and European Economic Community 2.0. MIWI Institute. URL: https://miwi-institut.de/archives/1060

[7] Kofner Y. (2021).  Reforming Germany’s migration policy: fairer, more humane, economy-oriented. MIWI Institute. URL: https://miwi-institut.de/archives/1065

Source: Tagesstimme.

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