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.

Talks on the Net-Zero Framework, which seeks to regulate greenhouse gas pricing on marine fuels, have been postponed until 2026 following a majority vote initiated by Saudi Arabia.
Liberty Energy warns about the impact of import duties on drilling and power equipment, pointing to a potential obstacle to federal goals related to artificial intelligence and energy independence.
Enedis will progressively reorganise off-peak hour time slots from 1 November, impacting 14.5 million customers by 2027, under new rules set by the Energy Regulatory Commission.
A report highlights the financial burden of fossil imports during the energy crisis and points to electrification as key to European energy security.
Prime Minister Sébastien Lecornu announced a review of public funding for renewable energy, without changing national targets, to avoid rent-seeking effects and better regulate the use of public funds.
The 2025 edition of the Renewable Electricity System Observatory warns of the widening gap between French energy ambitions and industrial reality, requiring immediate acceleration of investments in solar, wind and associated infrastructure.
Kogi State Electricity Distribution Limited reported a ₦1.3bn ($882,011) loss due to power fraud, threatening its operational viability in Kogi State.
More than 40 developers will gather in Livingstone from 26 to 28 November to turn Southern Africa’s energy commitments into bankable and interconnected projects.
Citepa projections confirm a marked slowdown in France's climate trajectory, with emissions reductions well below targets set in the national low-carbon strategy.
The United States has threatened economic sanctions against International Maritime Organization members who approve a global carbon tax on international shipping emissions.
Global progress on electricity access slowed in 2024, with only 11 million new connections, despite targeted efforts in parts of Africa and Asia.
A parliamentary report questions the 2026 electricity pricing reform, warning of increased market exposure for households and a redistribution mechanism lacking clarity.
The US Senate has confirmed two new commissioners to the Federal Energy Regulatory Commission, creating a Republican majority that could reshape the regulatory approach to national energy infrastructure.
The federal government launches a CAD3mn call for proposals to fund Indigenous participation in energy and infrastructure projects related to critical minerals.
Opportunities are emerging for African countries to move from extraction to industrial manufacturing in energy technology value chains, as the 2025 G20 discussions highlight these issues.
According to the International Energy Agency (IEA), global renewable power capacity could more than double by 2030, driven by the rise of solar photovoltaics despite supply chain pressures and evolving policy frameworks.
Algeria plans to allocate $60 billion to energy projects by 2029, primarily targeting upstream oil and gas, while developing petrochemicals, renewables and unconventional resources.
China set a record for clean technology exports in August, driven by surging sales of electric vehicles and batteries, with more than half of the growth coming from non-OECD markets.
A night-time attack on Belgorod’s power grid left thousands without electricity, according to Russian local authorities, despite partial service restoration the following morning.
The French Academy of Sciences calls for a global ban on solar radiation modification, citing major risks to climate stability and the world economy.

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.