A Bitter Blow: Scrapping Electricity Tax Cut Leaves Craft Businesses and Consumers in a Bind
Unfavorable Decision on Electricity Tax Reduction Sparks Deep Disappointment
In a major disappointment, the federal government has shelved its initial plan to slash electricity tax for craft businesses and consumers. The decision has sent ripples of dismay among affected parties, who argue that the move comes with a heavy financial burden.
The Central Association of German Crafts (ZDH) has expressed its discontent with the government's decision, this being a blow to the middle class, as per Jörg Dittrich, the ZDH President. The promise of tax relief in the coalition agreement was a significant factor for businesses like these who are energy-intensive. "The newly announced decision not to implement this relief as planned imposes a substantial burden," Dittrich commented.
Initially, the federal government pledged to lower electricity tax for all to the European minimum. However, this tax relief is no longer part of the draft budget presented by Finance Minister Lars Klingbeil. Federal Minister of Economics and Technology Katherina Reiche, in her statement at the Industry Day in Berlin, stated that the coalition agreement and budgetary realities are now aligned.
A Breach of Trust: Broken Promises
The same tax reduction will not be extended to consumers. Michael Kellner, energy spokesperson for the Greens faction in the German Bundestag, shared his disappointment on the Bluesky platform, claiming that lower prices for heating with heat pumps and electric cars would not only provide relief to pockets but also help shift away from fossil fuels more easily. "Instead, this coalition is breaking one of its central promises," Kellner stated.
CDU General Secretary Carsten Linnemann urged for the electricity tax reduction for all to be implemented immediately, asserting that the relief is crucial to address the CO2 price's impact and promote energy transition acceptance. CDU economic politician Kuban pointed out that financing such a reduction in electricity tax for all necessitates significant cuts elsewhere. He suggested that investment incentives for heat pump promotion should be reduced by the missing €5 billion if electricity is made cheaper for everyone. The government currently has approximately €15 billion earmarked for this purpose.
The Big Picture: Fiscal & Economic Priorities Driving Policy Shift
The government's decision to withdraw its electricity tax reduction plan is rooted in broader fiscal and economic policy considerations that center around industrial competitiveness and ensuring sound public investment. While the 2025 coalition agreement had initially included measures like reducing electricity taxes and capping grid fees to support energy transition and business affordability, such plans now make up a complex compromise between targeted subsidies and fiscal responsibility, all while accounting for extensive investment programs like the €500 billion infrastructure fund for energy, transport, digital networks, and education[2].
To put it into context, recent policy priorities appear to focus more on strategic sector-specific energy subsidies—benefiting industries that are deemed energy-intensive—rather than general electricity tax reductions. This trend seems to reflect a preference for targeted measures with potentially greater impacts on industrial competitiveness and the energy transition agenda, over broad-based tax reductions that might diminish public revenues essential for large-scale infrastructure and energy investments[2].
The government's strategic policy shift suggests a fine balance between supporting craft businesses and consumers while ensuring fiscal sustainability through carefully chosen subsidies and investments aimed at fostering long-term productivity and resilience[2]. Essentially, the German government is rethinking tax cuts in light of the need to strike a balance between supporting craft businesses and consumers and the sustainability of public finances, all while making strategic investments to drive the energy transition and industrial competitiveness.
- The Central Association of German Crafts (ZDH) has criticized the government's decision to withdraw its plan for a electricity tax cut, arguing that it imposes a substantial financial burden on energy-intensive craft businesses.
- Michael Kellner of the Greens faction in the German Bundestag has expressed disappointment over the broken promise of lower electricity prices for consumers, suggesting that this change would help shift away from fossil fuels more easily and provide relief to pockets.
- The government's decision to prioritize strategic sector-specific energy subsidies over general electricity tax reductions reflects its focus on industrial competitiveness and long-term productivity, while maintaining fiscal sustainability for large-scale infrastructure and energy investments.
