Government plan: Alleviating citizens from gas expenses by federal intervention
The German government has announced plans to relieve citizens and businesses from gas costs, primarily by abolishing the gas storage levy from 2026 onward. This measure is expected to reduce energy costs for all consumers by about €10 billion per year, translating into savings of up to €150 annually for private households. For energy-intensive industries, this levy abolition will provide significant cost relief and improve Germany’s competitiveness as a business location.
To finance this gas cost relief, the government will allocate €21.7 billion from the 2026 federal budget to the Climate and Transformation Fund (KTF), which will cover the outstanding balance of the gas storage levy account. The KTF, originally established in 2010 to support climate goals, will see its definition adjusted to allow for this new use of funds. This indicates substantial state borrowing to fund these measures.
Accompanying measures include lowering grid fees and maintaining permanently low electricity taxes for manufacturing companies and farmers, further easing energy costs. The government also plans broader reforms and investment support, aiming to consolidate the budget while promoting energy efficiency and climate initiatives.
The draft bill outlining these measures is reported by the "Rheinische Post" and is expected to be decided by the cabinet on Wednesday. The relief from gas costs is a proposed measure in the Fourth Act to Amend the Energy Industry Act. The gas storage surcharge abolition draft is part of this act.
The additional costs from filling the gas storage were passed on to end consumers. However, the draft of the Fourth Act to Amend the Energy Industry Act states that the costs of gas storage filling from 2022 will no longer be passed on to end customers but will be financed by the federal government. The energy industry was obliged to fill the gas storage with expensive gas.
The relief is intended to help German companies and private consumers deal with high gas prices. According to the Federal Ministry of Economics, the expected savings for a private four-person household would be between 30 and 60 euros per year in 2026.
This plan has elicited mixed reactions: industry groups mostly approve due to cost savings; some NGOs criticize the budget's climate priorities as insufficient. The government aims to provide relief of approximately 3.4 billion euros to citizens and businesses from gas costs by the end of 2025 through these measures.
[1] Rheinische Post, 2023. [Link to the article] [2] ntv.de, AFP, 2023. [Link to the article] [3] Federal Ministry of Economics, 2023. [Link to the official statement] [4] German Federal Government, 2023. [Link to the draft bill]
- The German government's proposal to abolish the gas storage levy from 2026 onward, as part of the Fourth Act to Amend the Energy Industry Act, aims to provide significant relief for both German businesses and private consumers, particularly in the face of high gas prices, and it will be financed by €21.7 billion from the 2026 federal budget.
- As part of the broader energy cost relief measures, the allocation of funds from the Climate and Transformation Fund (KTF) will allow for the adjustment of its definition to account for the new use of funds, indicated as substantial state borrowing, while also promoting energy efficiency and climate initiatives.
