German panel of experts proposes 2-stage gas price subsidy

BERLIN (AP) — A government-appointed panel of experts on Monday proposed a two-tier scheme to distribute up to 200 billion euros ($195 billion) in subsidies Germany has announced to ease the strain of high gas prices , a plan the group shared would still encourage people to save energy.

The panel proposed that the state pay the cost of natural gas customers’ monthly bills in December, followed by a price subsidy on part of their consumption from next spring.

This “gas and heating price brake” should take effect next March and apply until April 2024, said the co-chair of the committee, Veronika Grimm. Private gas customers would pay 0.12 euros per kilowatt hour for the first 80 percent of the previous year’s consumption.

That “roughly corresponds to the price level to be expected in the future,” Grimm told reporters in Berlin, adding that the plan aims to introduce a “new normal” but prevent price increases beyond that. “It will not be the case that the price will drop back to 7 cents in the future – we will not get Russian gas for a long time.”

Grimm argued that the plan still encourages people to save on gas because people who do would avoid paying higher prices over the cap. She pointed out that Germany, which has the largest economy in Europe, needs to reduce its previous gas consumption by about 20% to avoid a potential shortage this winter.

Deputy chairman Siegfried Russwurm, who heads the Federation of German Industries, said the proposal would see companies pay €0.07 per kilowatt-hour for 70 percent of their gas consumption in 2021 from early January.

Russwurm said rising gas prices pose an “existential” threat to more and more businesses.

“This is not just about the fate of individual companies and their jobs; it’s about the strength and export successes of German industry, because they are the backbone of the German economy,” he said.

The panel, which included representatives from industry and trade unions, scientists and legislators, presented its conclusions to Chancellor Olaf Scholz and the country’s economy and finance ministers on Monday.

Many European countries have proposed similar subsidies for fossil fuels, prices of which have soared around the world following the Russian attack on Ukraine. But some of Germany’s neighbors have criticized the huge sum Berlin is setting aside, arguing it would force others out of the market.

Scholz argues the criticism stems from a misunderstanding of his government’s plans, saying the German subsidy will prevent gas shortages that could occur under a system of enforced price caps proposed by other countries. He also noted that it is valid for a relatively long period of time.

Russia began reducing gas supplies to Germany through the Nord Stream 1 pipeline, the main supply route, in June and halted them altogether over a month ago. The pipeline has since been damaged by underwater explosions.

Germany got just over a third of its gas supplies from Russia before the disruptions began, and more before that.

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