Alternative to the gas surcharge
This is what the gas price cap could look like
By Juliane Kipper
09/27/2022, 2:50 p.m
In the meantime, the heads of all traffic light parties are in agreement: they want to move away from the controversial additional burden for gas customers by means of a surcharge. Not only trade unions and economists are campaigning for a gas price cap instead. The idea for this dates back to spring.
Despite high prices for energy and food, they should also help to save gas importers with billions – many consumers were angry with the idea of the federal government. It is now clear: the gas surcharge for millions of gas customers is shaking enormously. In the meantime, the leaders of all three traffic light parties have moved away from the controversial additional burden for gas customers.
Negotiations are already going on behind the scenes: Federal Finance Minister Christian Lindner has campaigned for a gas price brake, trade unions and economists are talking about a gas price cap. Behind both terms there is a similar intention that makes the high expenses more bearable for consumers.
Already in February of this year, the German-born US economist Isabella Weber and Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation, brought a gas price cap into play. What is meant by this is a subsidized basic consumption. “Our idea is to say: We don’t want to let this gas price increase fully affect households,” Dullien said on the “System Relevant” podcast earlier this year. A basic consumption of gas should therefore be capped.
This means: The gas price must not rise above the level of the previous year. “Of course you can’t say that the suppliers have to sell their gas cheaper, because then the companies will go bankrupt. The basic consumption should therefore be subsidized by the federal government.”
5000 kilowatt hours as a base socket
According to IMK boss Dullien, the reduced costs would lower the measured inflation – this in turn stabilizes inflation expectations, reduces the risk of a price-wage spiral and calms wage conflicts. In addition, “households with gas heating would be relieved in a targeted manner”.
Dullien and Weber could imagine capping 5,000 kilowatt hours as a basic base and 2,000 kilowatt hours for each additional family member at 13 cents per kilowatt hour. Annual gas consumption of around 20,000 kilowatt hours is generally assumed for an average single-family household. According to Dullien, 13 cents per kilowatt hour roughly corresponds to the current average price.
Of the German trade union federation even estimates a basic requirement of 8000 kilowatt hours for 7.5 cents per unit. Households with more people should receive a higher cap proportionately. earnings demands that the costs for the normal consumption of a family of four of 12,000 kilowatt hours be kept at the 2021 level.
The CSU has proposed a gas price cap for three quarters of private consumption. “For private households, it would be conceivable to cap 75 percent of previous gas purchases with a citizen base price,” said CSU regional group leader Alexander Dobrindt the “Augsburg General”. Beyond this cap, the full gas price would then have to be paid. “This means that the incentive to save energy remains, but heat is also affordable.”
Amount of basic needs decisive
economist Ruediger Bachmannwho teaches at Notre-Dame University, Indiana, maintains a general gas price capright “economic idiocy”. This is because the most important goal, namely reducing gas consumption, is missed. In case of doubt, even more gas would be consumed. A two-stage model with a defined basic requirement, on the other hand, could be the solution. “Here, a basic requirement is de facto subsidized by the state and enough people still have incentives to curb gas consumption,” says Bachmann in the WDR 5 Morgenecho. What is important, however, is how this limit, from which consumers do not pay the subsidized and therefore cheaper tariff, but the significantly higher market price, is defined.
“If the basic requirement is set so high that nobody is faced with the market prices, then it’s no use,” says Bachmann. “But if you get 80 percent of the previous year’s consumption subsidized, then people have an incentive to actually save that 20 percent.” But that’s not ideal either, says Bachmann.
Together with colleagues, the economist therefore designed a so-called credit model in a study entitled “How to do it”. This includes two options. On the one hand, a kind of credit on future bills from the energy supplier could encourage consumers to save gas. In this way, those who save gas could temporarily compensate for the then higher prices. Those who consume the same or more, however, have to pay extra. On the other hand, according to Bachmann, there is also the possibility that end customers pay a tax that they get back in full depending on their savings – and possibly even a bonus on top of it.
In addition to the high level of bureaucracy involved in introducing the measure, critics primarily point to the financing. According to calculations by the Federal Ministry of Economics and Technology, an amount of 2.5 billion euros per cent and kilowatt hour would be needed from the state treasury in order to lower the end consumer price for gas by capping it. The total costs would then depend on the estimated basic requirement, the chosen cap price and further gas price developments.
DIW boss expects costs of tens of billions
The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, expects high costs for the treasury from a gas price cap of the order of 30, 40, 50 billion euros. In contrast to what was demanded by Federal Finance Minister Christian Lindner, the debt brake “actually cannot be observed if you are honest,” said Fratzscher ntv. The DIW boss pointed out that the debt brake can be suspended in emergencies. “If this isn’t an emergency, then I don’t know what could be,” he said. Therefore, the debt brake will fall, “even if the Federal Minister of Finance wants to sell himself as expensively as possible”.
Similar to Dullien and Weber, Fratzscher also advocated a variant that would cover 80 percent of a household’s gas consumption with a price cap. “That would ensure that people with middle, low incomes, who generally have a smaller apartment, are relieved in a targeted, quick and sufficient manner,” said the economic researcher. “In addition, you still have the incentive to save.”
When it came to the time limit for the price cap, the DIW boss spoke out in favor of a year and a half. “It’s telling people, over the next two winters, you can rest assured that prices aren’t going to skyrocket any more.” After that there will be a fall in the price of gas on the world market as more sources of supply become available.