IMF Questions Germany on Industrial Energy Subsidies

The IMF warns against Germany's plans to subsidize industrial energy, underlining their counterproductive effects.

Share:

Allemagne

Comprehensive energy news coverage, updated nonstop

Annual subscription

8.25$/month*

*billed annually at 99$/year for the first year then 149,00$/year ​

Unlimited access • Archives included • Professional invoice

OTHER ACCESS OPTIONS

Monthly subscription

Unlimited access • Archives included

5.2$/month*
then 14.90$ per month thereafter

FREE ACCOUNT

3 articles offered per month

FREE

*Prices are excluding VAT, which may vary depending on your location or professional status

Since 2021: 35,000 articles • 150+ analyses per week

The debate on energy subsidies intensifies, as political orientations and economic concerns collide. The International Monetary Fund’s (IMF) recommendation to abandon electricity subsidies for Germany’s manufacturing industry sheds a harsh light on the tensions at the heart of Europe’s most powerful economy. Alfred Kammer, Director of the IMF’s European Department, made the institution’s position clear in a recent virtual conference, pointing out that the planned subsidies could prove counter-productive, raising prices for non-beneficiaries and indirectly supporting fossil fuels.

Political tensions and economic implications

Attention is focused on the long-term implications of such measures for the country’s energy transformation. The emphasis on the need for a transition torenewable energy sources is reinforced by the IMF’s warning against the delays that such subsidies could cause. These remarks come against a backdrop of diverging opinions within the German government coalition, illustrating the complexity of the political and economic issues at stake.

The Electricity Price Cap: A Subject of Discord

On the one hand, the Minister of the Economy, backed by energy-intensive industries, is advocating a price cap to mitigate the impact of rising costs on sectors such as chemicals and steel. In opposition, the Minister of Finance refutes this approach, pointing out the budgetary impact it would have. These divergent positions reflect a national dilemma exacerbated by the war in Ukraine, which has pushed up energy prices and tested the resilience of industries.

The German Chancellor is seeking to balance these prospects with the promise of a solution that would avoid dramatic consequences for businesses in the face of the energy crisis. His role as mediator is crucial as Germany, according to IMF projections, faces an economic contraction of 0.5% in 2023, ranking it among the least robust economic performers in Europe.

Economic outlook for Germany and the Eurozone

In its report, the IMF stresses that countries with dense, energy-intensive manufacturing sectors are more affected than those oriented towards services and tourism. This puts into perspective the distinct challenges faced by national economies in the face of global turbulence. At a time when the euro zone is anticipating modest growth, Germany finds itself at a crossroads, having to reconcile the needs of economic preservation with the imperatives of a sustainable energy transition.

In Search of Balance: The German Government’s Response

The IMF’s analysis of German energy subsidies highlights the tensions between immediate economic imperatives and energy transition objectives. As Germany strives to find a viable balance, the road to a consensual solution remains fraught with obstacles, reflecting a major challenge for the future of its energy and economic policy.

The Malaysian government plans to increase public investment in natural gas and solar energy to reduce coal dependency while ensuring energy cost stability for households and businesses.
The study by Özlem Onaran and Cem Oyvat highlights structural limits in public climate finance, underscoring the need for closer alignment with social and economic goals to strengthen the efficiency and resilience of public spending.
Oil major ExxonMobil is challenging two California laws requiring disclosure of greenhouse gas emissions and climate risks, arguing that the mandates violate freedom of speech.
The European Court of Human Rights ruled that Norway’s deferral of a climate impact assessment did not breach procedural safeguards under the Convention, upholding the country’s 2016 oil licensing decisions.
Singapore strengthens its energy strategy through public investments in nuclear, regional electricity interconnections and gas infrastructure to secure its long-term supply.
As oil production declines, Gabon is relying on regulatory reforms and large-scale investments to build a new growth framework focused on local transformation and industrialisation.
Cameroon will adopt a customs exemption on industrial equipment related to biofuels starting in 2026, as part of its new energy strategy aimed at regulating a still underdeveloped sector.
Facing a persistent fuel shortage and depleted foreign reserves, the Bolivian parliament has passed an exceptional law allowing private actors to import gasoline, diesel and LPG tax-free for three months.
Ghana aims to secure $16 billion in oil revenues over ten years, but the continued drop in production raises doubts about the sector’s long-term stability.
The government of Kinshasa has signed a memorandum of understanding with Vietnam's Vingroup to develop a 6,300-hectare urban project and modernise mobility through an electric transport network.
ERCOT’s grid adapts to record electricity consumption by relying on the growth of solar, wind and battery storage to maintain system stability.
The French government will raise the energy savings certificate budget by 27% in 2026, leveraging more private funds to support thermal renovation and electric mobility.
Facing opposition criticism, Monique Barbut asserts that France’s energy sovereignty relies on a strategy combining civil nuclear power and renewable energy.
The European Commission is reviving efforts to abolish daylight saving time, supported by several member states, as the energy savings from the practice are now considered negligible.
Rising responses to UNEP’s satellite alerts trigger measurement, reporting and verification clauses; the European Union sets import milestones, Japan strengthens liquefied natural gas traceability; operators and steelmakers adjust budgets and contracts.
The European Commission unveils a seven-point action plan aimed at lowering energy costs, targeting energy-intensive industries and households facing persistently high utility bills.
The European Commission plans to keep energy at the heart of its 2026 agenda, with several structural reforms targeting market security, governance and simplification.
The new Liberal Democratic Party (LDP)–Japan Innovation Party (Nippon Ishin no Kai) axis combines a nuclear restart, targeted fuel tax cuts and energy subsidies, with immediate effects on prices and risk reallocations for operators. —
German authorities have ruled out market abuse by major power producers during sharp price increases caused by low renewable output in late 2024.
A new International Energy Agency report urges Maputo to accelerate energy investment to ensure universal electricity access and support its emerging industry.

All the latest energy news, all the time

Annual subscription

8.25$/month*

*billed annually at 99$/year for the first year then 149,00$/year ​

Unlimited access - Archives included - Pro invoice

Monthly subscription

Unlimited access • Archives included

5.2$/month*
then 14.90$ per month thereafter

*Prices shown are exclusive of VAT, which may vary according to your location or professional status.

Since 2021: 30,000 articles - +150 analyses/week.