Germany offers €16 billion aid package to counter soaring energy costs

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Germany’s ruling coalition has agreed a relief package worth around 16 billion euros to ease the burden of rising energy costs, with measures ranging from lowering the price three months of fuel to a temporary increase in the use of coal.

Christian Lindner, Minister of Finance, told a press conference on Thursday that the deal was aimed at helping individuals and businesses manage the price spike triggered by Russia’s invasion of Ukraine.

“The coalition believes that we, the people and the economy, need to protect ourselves in the short term and for a limited time against these huge price increases,” he said.

The exact size of the package has yet to be finalized, but Lars Klingbeil, co-leader of the centre-left German Social Democrats (SPD), told reporters it would be similar to a previous relief package of 16 billion euros adopted four weeks ago.

The measures include a one-time tax reduction of €300 for individuals, as well as additional reductions for low-income families. Fuel taxes will be reduced for three months, with the price per liter reduced by 30 cents for petrol and 14 cents for diesel. For the next 90 days, travelers will also be able to purchase a €9 pass giving them one month of unlimited use of public transport.

Germany’s move comes as Brussels works on EU-wide plans to cut energy bills and the UK unveiled a cut in fuel taxes this week.

The deal was hotly contested between Chancellor Olaf Scholz’s German governing coalition of the SPD, the Greens and the business-friendly Free Democrats (FDP), with talks dragging on late into Wednesday night.

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Lindner, a member of the FDP, had lobbied unsuccessfully for a price reduction at gas stations instead of a fuel tax reduction. The Greens also lost a battle for stricter energy efficiency regulations than those finally agreed.

The deal also includes a plan to reduce gas consumption – 55% of Germany’s imports come from Russia – by increasing dependence on coal, a move that could hurt the country’s climate goals. Germany aims to become greenhouse gas neutral by 2045 and hopes to reduce its emissions by at least 65% by 2030 compared to 1990 levels.

Before the war in Ukraine, the government aimed to bring forward Germany’s phase-out of coal – one of the main sources of greenhouse gas emissions – from 2038 to 2030. In a statement outlining the measures scheduled for Thursday, the coalition said it would still try to meet that goal.

The government is struggling to balance growing pressure for it to join in tougher sanctions on Russian energy, on which it relies heavily, and fears that public unrest will grow as prices rise. In addition to its gas imports, Germany gets 50% of its coal and 30% of its oil from Russia.

The deal has to pass through the Bundestag, but that is almost certain given that the three coalition parties hold a parliamentary majority.

The package also includes new energy efficiency targets to be implemented in the coming years. Green leaders argued that this was as essential as boosting renewables to weaning the country off fossil fuels.

“We do not know, in these difficult times, what awaits us. . . we will not be able to offset every burden,” Green Party co-leader Ricarda Lang said.

“That is why it is all the more important that we not only look here and now, but also how to avoid such situations in the future. In other words: how we can completely get rid of Russian gas, Russian oil and fossil fuels.

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