Strictly speaking, what the gas commission is proposing is not a gas price brake, but a gas bill brake, says the economist Rüdiger Bachmann in an interview with ntv.de. He considers Chancellor Scholz’s announcement that gas prices would have to go down to be a mistake, which also explains the excitement in the rest of the EU: “If there were no incentives to save in Germany, consumption would not fall and there would be less gas for Europeans Neighbors.”
Fortunately, the Gas Commission’s concept also includes savings incentives. “It’s not an ideal textbook solution,” says Bachmann, “but I assume that it was the maximum that could be achieved.”
ntv.de: Veronika Grimm, Chairwoman of the Gas Commission, said when presenting the gas price brake concept that speed is now required. But the heating season has long since begun – isn’t the gas price brake much too late?
Rüdiger Bachmann: Ms. Grimm is right, speed is required. The federal government should have started developing such a concept much earlier. We – a group of economists led by Christian Bayer, who is also a member of the Gas Commission, and I – called for this back in March. It should have started by the summer at the latest, but the federal government didn’t want to hear about it at the time. At that time, the additional funds of 200 billion euros were not yet available. The Federal Ministry of Finance has still refused to provide the money.
According to the concept, there should be a refund for private gas consumers in December, the actual gas price brake should not come into force until March. Then there should be a basic quota: 12 cents per kilowatt hour for 80 percent of the consumption on which the down payment from September is based. So two very cold months are not cushioned, January and February. Does this make sense?
This is a misunderstanding. The Commission proposes that the state accept the December discounts on the basis of the September discounts. But this sum is intended to serve as a “financial bridge” until the second stage of this concept comes into effect. Ms. Grimm said the gas suppliers had declared that they would not be able to implement another model so quickly. You have to take note of that. It is very important, and consumers have to be told this, that despite the down payment in December, it is still worth saving gas because the actual consumption will continue to be billed at the end.
How do you rate this solution?
It’s not an ideal textbook solution. It would have been better to start right away with the regulation, which should only apply from March. But then you probably wouldn’t have had the suppliers on board, and you’re dependent on them. After all, the December payment is organized in such a way that gas savings incentives are retained. In the second stage, from March, an energy saving bonus would have been nice, so that there was a stronger incentive to save on the other side of the 80 percent, but according to the interim report, that may still come. What’s also a little ugly about this concept is that in December, customers whose gas bills haven’t even been increased will also receive a discount. They worked with the watering can, but that will be turned off in March. The concept is not ideal, but I assume that it was the maximum that could be achieved.
For industrial gas consumers, a consumption of 70 percent of the year 2021 is to be subsidised. Is that appropriate?
A distinction must be made here: non-industrial trades, i.e. small and medium-sized businesses, are treated like private households because they usually have the same standard gas contracts. There may be a special regulation for large industrial consumers because their number is manageable, up to 25,000 companies are involved. The gas suppliers dare to do it faster. And there is still a huge savings incentive for them too: as soon as a company exceeds 70 percent, it has to pay market prices. In my view, this is a good compromise.
According to Ms. Grimm, the Commission faced the difficulty of having to estimate what the new normal will look like, i.e. where the gas price will be if LNG deliveries are regular. This estimated future gas price is higher than historical prices but lower than current prices. The message to the industry is: We are already financing the “new normal” for you today. If you can’t survive with that, then it’s probably the case that you will no longer have a business model in Germany in the long run. This will affect individual companies, but will almost certainly not cause any lasting damage to the industrial structure as a whole. Certain things, like fertilizers, may be manufactured elsewhere in the future.
Actually, the federal government promised that prices would go down. “The prices have to go down,” said Chancellor Scholz, that was the purpose of the “defense shield,” and Finance Minister Lindner called for “a gas price brake that lowers the price.”
That was a very unfortunate and dangerous communication from Scholz and Lindner. When Scholz said that when presenting the “double boom”, he immediately triggered massive unrest in the EU. Here it really depends on a precise economic language, which Scholz and Lindner missed. If Germany were to simply lower the price of gas, that would be a policy at the expense of its neighbors – a so-called “beggar thy neighbor” policy. Because the amount of gas on the market is limited. If there were no savings incentives in Germany, consumption would not fall and there would be less gas for the European neighbors. Fortunately, this is not what the model looks like. It doesn’t just ensure that “prices go down”. In this respect, strictly speaking, it is not a gas price brake, but a gas bill brake.
The economist Sebastian Dullien from the Institute for Macroeconomics and Economic Research, which is close to the trade union, has criticized that the concept relieves households with high gas consumption significantly more than those with low gas consumption. Isn’t it really nonsensical and unjust to relieve higher incomes?
This is not possible otherwise. It is true that there is a connection between gas consumption and income. But that is an average view. The reality is not average. There are also huge differences in gas consumption within income groups. How much gas someone uses depends heavily on their living conditions. One may use a lot of gas because they have a pool. But it could also be that he is living in a poorly insulated apartment, or that he is an old widow whose house is actually too big and who freezes quickly. Do you want to leave the old woman out in the cold now? no The 80 percent rule ensures that at least 80 percent of the time nobody is left out in the rain. It is socially irresponsible to act as if one can orient oneself to averages when the maxim is that as many as possible are helped in the winter.
But the pool owner is also relieved.
That’s so. Of course, it would be better if income were taken into account in the relief. But the gas suppliers don’t know the income of their customers. And the state does not know the gas consumption of taxpayers. In order to change that, you would have to link data that is currently not linked, that currently cannot be linked under data protection law and that, from a purely technical point of view, could by no means be linked quickly enough. By the way: Better data linking has been overdue in Germany for years, but politicians don’t want to do it.
But you also have to say that the Gas Commission has installed an instrument that at least narrows the gap in justice a little, because it recommended that all these payments above a certain amount should be treated as a pecuniary benefit. People with low gas consumption and low income should not have to pay income tax on it, the rich should.
Hubertus Volmer spoke to Rüdiger Bachmann
