Policy Update Market: Fuel Tax Debate: Why Merz Should Cut Electricity Tax Instead

The German government is considering a third fuel tax rebate to subsidize fossil fuel consumption, following similar measures in 2022 and 2026. The article argues that this is misguided, citing the three billion euros spent on fuel subsidies in 2022 without lasting benefits. It proposes reducing electricity taxes instead, as this would better incentivize the transition to heat pumps and electric vehicles, support climate goals, and provide more socially equitable relief since all households consume electricity. The article highlights broken promises from the coalition agreement to lower electricity taxes to the EU minimum, and notes that only industry has benefited so far. It also suggests alternatives like expanding renewables, battery storage, and smart meters, as well as social leasing for electric cars.