ifo Institute Favors Abolishing German Electricity Tax to Promote E‑Mobility

“Subsidizing the price of power for electric cars reduces the incentive to save electricity and thus exacerbates shortages in other sectors,” says Clemens Fuest, President of the ifo Institute and coauthor of the short study. For effective climate protection, the authors recommend a uniform CO₂ price in EU emissions trading. Other country- and sector-specific measures undermine emissions trading, they say, and lead to costly double regulation.

In addition, policymakers should work to ensure more electricity is produced and available, including through greater integration of European electricity markets. “To ensure voltage fluctuations don’t lead to blackouts, what’s needed – in addition to an expansion of distribution grids – are smart electricity meters and better grid monitoring. Owners of electric cars must be given price incentives to charge their vehicles when there is sufficient electricity available,” Falck says.

Manfred Gößl, CEO of the Chamber of Industry and Commerce for Munich and Upper Bavaria, says: “For the expansion of electromobility as well as for the energy transition as a whole, it is becoming clear that cheap electricity is the simplest and most important lever and incentive. Electricity must become cheaper in relative terms, and to achieve this, policymakers must pull out all the stops, from abolishing the electricity tax to massively expanding generation capacity and transmission grids.”