The gas price brake should not only relieve private consumers but also companies and thus preserve production sites and jobs in Germany. Fearing it could trigger the opposite, some economists are calling for a fundamental change. An old dispute between experts breaks out.
Actually, all the major points of contention within the governing coalition were considered decided. After the first stage of the gas price relief package, the draft for the so-called price brake should also pass the cabinet this week. But yesterday the government suddenly halted the legislative process. “In view of the complexity and also the need for coordination”, the federal cabinet will probably no longer deal with it this week, said Deputy Government Spokeswoman Christiane Hoffmann.
Above all, an open dispute has broken out among experts over one question: Can companies simply pocket the subsidies from the gas price brake, even if they produce less or nothing at all? Or are they even allowed to resell discounted gas at much higher market prices and turn state aid into money? This is exactly what is expressly provided for in the expert commission’s draft. With such a possible “utilization of the gas quota on the market” the experts want to create an additional incentive to save even more than the 30 percent gas that is not covered by the subsidy of the basic quota.
The thought that corporations could simply pocket state aid or sell it on pisses some people off. “The state must prevent industry from excluding it like a Christmas goose when it comes to gas aid,” demanded the left. This is especially true when these companies reduce or stop production and jobs are lost as a result.
However, this is by no means just a question of justice. In the worst case, this savings incentive created by the gas price brake could lead to companies ceasing production or relocating abroad, warn economists Sebastian Dullien and Erik Thie from the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation and economics professor Isabella Weber, who is considered one of the inventors of the gas price brake. In many energy-intensive sectors, the gas subsidy or the proceeds that can be achieved by reselling the quota are likely to be greater than the profit from normal business activities.
If, for example, chemical companies massively shut down their production in order – as Dullien, Thie and Weber warn – to “become gas dealers and shut down their business in the meantime”, this would have massive repercussions not only for these companies and their employees. “Cascade effects” could occur. This means that other companies that need the corresponding chemical precursors would also be affected. The car industry is mentioned as a warning example, which was repeatedly paralyzed during the corona pandemic and at times also during the Ukraine war due to the lack of a few supplies.
Even if some chemical precursors could be obtained from abroad, such a “hibernation premium” would promote “deindustrialization,” the IMK economists warn. They are demanding that the gas price subsidies should not be paid out to companies regardless of actual consumption, as the Commission and the federal government have so far envisaged, but only for the amount used in production. The authors get approval from other union and SPD-related colleagues, among others. Economist and SPD board member Gustav Horn wrote on Twitter that the gas price brake in its currently planned form could trigger a “deep recession”. According to the Süddeutsche Zeitung, Chancellor Olaf Scholz would also like to adjust the gas price brake accordingly.
Other economists, including Veronika Grimm, economist and chair of the Gas Experts Commission, disagree, emphasizing the importance of the market mechanism to provide incentives for maximum gas savings. Stopping the production of cheaper importable primary products in order to use the gas elsewhere makes sense. This is promoted by the consumption-independent subsidy and the tradability of the gas quota. Should gas be saved “where it is difficult to replace”? Asks the economist Christian Bayer rhetorically on Twitter.
There are possible compromises and alternatives: The payment of the subsidy could be linked to the condition that locations and jobs are maintained, even if production is temporarily suspended. Instead of allowing trade in the subsidized gas in general, the state could also hold targeted buy-back auctions if the energy source actually becomes scarce, which, after all, is not the case at the moment.
But the debate among economists is about more. The fronts in the dispute are the same as in the spring, when a large group of economists argued in a study that Germany could make ends meet reasonably well without Russian gas, thereby supporting calls for a gas and oil boycott of Russia. Advised, among others, by IMK boss Dullien, who predicted a serious economic crisis for Germany in this case, the federal government prevented such an embargo.
At the time, the chancellor publicly criticized the economists’ calculations as “irresponsible”. In the meantime, however, they and their models can feel largely confirmed, the industry has recently saved massive amounts of gas without causing dramatic upheavals. A central element in these models was the replacement of energy-intensive products manufactured in Germany with cheaper imports.
