Experts warn of risks for infrastructure and climate

Possible consequences

Lower electricity price: is that really possible?

Many parties promise lower electricity prices before the election. The plans include tax cuts and the reform of network charges, but experts warn of possible consequences.

Before the Bundestag election, many parties promise to reduce electricity prices. For example, by reducing electricity tax, the abolition of the CO2 tax or the reform of the network charges. What does that mean?

Network charges are charged by the (connection) network operator. They grant access to the electricity transport and distribution system and are independent of distance, explains the Federal Network Agency. It is therefore a fee for the use of the power grid. The network usage fees are therefore required to maintain and expand the power grid. A reduction in network charges could therefore be exposed to the electricity infrastructure.

The height of the network charges varies depending on the connection system operator (details can be seen here). The differences result, among other things, by loading the network, according to the age and quality of the lines, the need for power grid expansion and other factors. However, it is regulated by the state how high the fee may be.

The electricity tax is intended to create incentives to reduce energy consumption and to strengthen the use of renewable energies. According to the Federal Ministry of Finance, the electricity tax brings the federal government seven billion euros annually. The majority of this tax revenue flows into the additional federal grant to the statutory pension insurance. A tax reduction would therefore be at the expense of pension insurance.

The electricity tax is 2.05 cents per kilowatt hour and currently accounts for seven percent of the electricity price.

Among other things, a CO2 tax is charged on petrol, diesel, gas and heating oil that will make it more expensive. The levy should therefore lead to fossil fuels become more unattractive and consumers and industry are increasingly using renewable energies.

The CO2 tax flows into the climate and transformation fund (KTF) of the Federal Government (climate fund). With the income, climate protection is to be promoted and the conversion of various industry in the direction of renewable energies is to be financed, explains “Finanztip.de”. This includes, for example, the expansion of the rail network, the structure of the hydrogen industry, the expansion of the charging infrastructure for electric cars or the promotion for the construction of energy-efficient buildings, according to the experts. However, part of the income can also be used elsewhere, for example for tax cuts, according to the report “Options for using the income from the CO2 prize”.

The CO2 price is currently 55 euros/ton. From 2026 the price increases to up to 65 euros/ton. For the following years, experts predict an increase in tax to up to 200 euros (details on this here). The CO2 tax is charged as part of the EU emission trade system-here the CO2 price per ton was around 83 euros/ton (January 2024). However, some countries in Europe have also introduced national CO2 taxes. It is highest in Switzerland: a ton of CO2 emissions costs 118.33 euros-in Poland, on the other hand, it is only 13.27 euros (as of 2024).

By the way: other countries such as Japan, Mexico or Canada have also introduced a CO2 tax.