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German government scraps electricity tax cuts for households

Reducing electricity costs, for both businesses and private homes, was among the conservative Union parties' (CDU/CSU) major promises during their campaign at the start of the year. But now, as the leaders of the black-red government, along with the Social democrats (SPD), they have decided to rescind the proposed electricity tax cuts for private homes, citing budget constraints. The move can be seen as a significant early failure for Germany's federal leadership. Cutting the electricity tax quickly and "for everyone" was written into their coalition agreement. READ ALSO: Why Berlin has the highest electricity prices among Europe's capital cities Budget constraints The cabinet decided last week to initially reduce the electricity tax only for the manufacturing, agriculture and forestry industries. Cutting electricity taxes for businesses was a top item among the conservatives' plans for boosting the German economy. But to extend the tax cuts to private households, as was originally promised, has since been deemed too expensive. Doing so was expected to cost €5.4 billion in 2026. As of Wednesday, the coalition partners have failed to find financing for the household tax cuts. Germany has some of the highest electricity taxes among European countries - a fact that has been both exaggerated and weaponised by members of the far-right Alternative for Germany . Facing both reduced tax revenue and enormous expenses for defence and infrastructure revitalisation projects, the German government has hinted that savings will need to be found elsewhere. READ ALSO: Why Germany's new government is already facing a black hole in its budget Union leader defends the decision Union parliamentary group leader Jens Spahn told the ARD morning magazine that the coalition is "sticking to the common goal of significantly reducing electricity costs for everyone". Spahn cited plans to reduce electricity grid fees and scrap the gas storage levy from the beginning of 2026, which would be expected to reduce prices for private households. For her part, the chairwoman of the German Social Association (SoVD), Michaela Engelmeier, sees the move as a "fatal signal". READ ALSO: How Germany's electricity tariff rules have changed 'Wrong priorities' Critics of the move see it as aiding big industry players while ignoring the needs of private consumers and small business. The German Confederation of Skilled Crafts (ZDH) said the policy would be 'a blow to small and medium-sized enterprises.' Advertisement In a report by ZDF , the President of the German Chamber of Industry and Commerce noted 'many angry calls from companies that had been counting on a reduction in electricity tax'. The news comes at a striking time, as Germany has just been hit by a severe heatwave . Climate researcher Mojib Latif accused Chancellor Friedrich Merz and Federal Minister of Economics Katherina Reiche of having the "wrong political priorities", according to reporting by the Redaktionsnetzwerk Deutschland . An op-ed published by Spiegel argues that by relieving the gas levy but not reducing electricity costs the black-red coalition is effectively promoting the use of climate harming fossil fuels. With reporting by DPA.