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German Energy-Tax Benefits May Violate EU Law, Green Group Says

Germany’s plan to offer industrial producers 20 billion euros ($25 billion) of energy-tax benefits in the next decade may violate European Union competition law, according to environmental group Deutsche Umwelthilfe.

Chancellor Angela Merkel’s Cabinet this month agreed to extend tax benefits through 2022 in return for companies raising energy efficiency. The target of a 1.3 percent expansion in efficiency a year through 2015 is too low because it would automatically be achieved because of a German program to replace its nuclear plants with renewable generators, Umwelthilfe said.

“That means the government will hand more than 20 billion euros to at least one fifth of producing companies in return for little to no effort,” probably violating EU laws and unfairly burdening consumers, Gerd Rosenkranz, the campaign group’s policy chief, said in Berlin. “We will file a complaint with the European Commission if the bill is passed unchanged.”

Merkel is shifting Germany to renewables from atomic power after the Fukushima nuclear meltdown in Japan last year. The plan is estimated to cost 200 billion euros, the DIW economic institute in Berlin says. Companies have voiced concern that it will raise power prices for users in Europe’s biggest economy.

Industry officials argue the tax benefits are important to soften the effect of “international competition distortions,” due to costs linked to renewable-energy subsidies, said Michael Basten, the head of Germany’s building-materials lobby, BBS.

“We have the second-highest industrial power prices in Europe,” Basten told reporters in Berlin. “I’d say 1.3 percent is quite ambitious and we expect the EU to permit this plan.”

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