Broad Electricity Price Subsidies for Industry Are Not a Suitable Relief Instrument

Lea Bernhardt, Tomaso Duso, Robin Sogalla and Alexander Schiersch

DIW Weekly Report, 2023, vol. 13, issue 38/39, 257-265

Abstract: The sharp rise in electricity prices has led to a discussion on possible subsidies for companies in the form of an industrial power tariff. The subsidies should help companies remain internationally competitive and prevent them from relocating overseas. Although German electricity prices for (industrial) firms are around the European average due to many tax exemptions, they are significantly higher compared to other non-European countries. Simulations using price increases of different magnitudes show that only a small share of companies would face major price increases compared to their value added. Moreover, there is considerable heterogeneity between the sectors. For example, the industrial gases or aluminum production sectors would be much more affected than other sectors. Thus, a large-scale industrial electricity price subsidy does not seem to be very effective. Selective relief for certain sectors may be problematic under competition law and may need to be granted well beyond the temporary nature of the subsidy.

Keywords: energy costs; subsidy; competition policy (search for similar items in EconPapers)
JEL-codes: H2 K32 L5 Q4 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.881230.de/dwr-23-38-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwdwr:dwr13-38-1

Access Statistics for this article

DIW Weekly Report is currently edited by Tomaso Duso, Marcel Fratzscher, Peter Haan, Claudia Kemfert, Alexander Kritikos, Alexander Kriwoluzky, Stefan Liebig, Lukas Menkhoff, Karsten Neuhoff, Carsten Schröder, Katharina Wrohlich and Sabine Fiedler

More articles in DIW Weekly Report from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().