Heating, refueling, electricity: what household cleaning means

Finances - Heating, refueling, electricity: what household cleaning means

For many citizens and companies, the decisions made by the traffic light coalition shortly before Christmas are not a nice present: following the budget ruling by the Federal Constitutional Court, the coalition had to scrape together billions to plug holes. There will be no major cuts, especially in the social budget. At the same time, however, there will probably be noticeable burdens on fuel and electricity, among other things.

The coalition partners had to find 17 billion euros in the core budget alone for the coming year, and another 12 billion in the special fund for investments in climate protection and a modern economy. Funding programs will also be cut, with 45 billion euros of expenditure to be cut by 2027. The traffic light government did not present a precise list of cuts, but some of them have already leaked out.

The opposition CDU/CSU spoke of "massive tax increases at the expense of citizens and the economy". The Ministry of Finance, on the other hand, pointed out that from the beginning of the year, citizens would be relieved of 15 billion euros in parallel via income tax. The reduction in subsidies also serves the goal of lowering the electricity tax for the manufacturing industry. What the agreement means for consumers:

Refueling and heating will become more expensive

The CO2 price for refueling and heating with fossil fuels is to be increased. Economics Minister Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) said that they were returning to the old price path of the grand coalition.

This means that the CO2 price will not rise to 40 euros per tonne on January 1, 2024 as previously planned - but to 45 euros. It currently stands at 30 euros. The coalition had postponed an increase in the CO2 price from the beginning of 2023 due to the energy crisis - and had thus deviated from the price path of the previous government consisting of the CDU/CSU and SPD.

The CO2 price is then set to rise to 55 euros in 2025. The revenue from this will flow into the Climate and Transformation Fund, which will be used to finance projects for climate protection, among other things. The Federal Constitutional Court had cut 60 billion euros from this fund in mid-November. The higher price means that there is now additional revenue.

According to the ADAC, users of petrol cars will have to expect additional costs of 1.4 cents per liter due to the faster increase. In total, the price of a liter of petrol will therefore rise by around 4.3 cents at the turn of the year. Diesel drivers would have to reckon with an additional 1.6 cents compared to the original plans, meaning that a liter of diesel would become around 4.7 cents more expensive.

According to calculations by the comparison portal Verivox, gas will increase in price by 0.39 cents per kilowatt hour and heating oil by 4.8 cents per liter. A typical family with a heating requirement of 20,000 kilowatt hours would have additional annual costs of 78 euros for gas and 96 euros for oil heating.

Rising electricity prices

Consumers and companies must also be prepared for higher electricity prices. The reason: a planned 5.5 billion federal subsidy for electricity grid fees is being canceled. The grid fees for the electricity highways are a component of the electricity price. The transmission system operators have announced that the grid fees for 2024 will now double to an average of 6.43 cents per kilowatt hour.

The company 50Hertz, an operator of the electricity highways, estimates that this will mean additional costs of around 60 euros for a household customer with an average consumption of 3,500 kilowatt hours per year. The German Chamber of Industry and Commerce criticized that the economy as a whole was also threatened with significantly higher electricity prices at the turn of the year. However, there are significantly reduced grid fees, especially for large industrial companies.

The coalition is also sticking to the planned reduction in electricity tax for the manufacturing industry. The state gas and electricity price brakes, on the other hand, will expire at the end of the year as a result of the ruling and not at the end of March as originally planned.

Subsidies for electric cars expire earlier

There have already been cuts to state subsidies for electric cars and more are planned. According to Habeck, the coalition wants to end the environmental bonus earlier than previously planned. The purchase premiums for e-cars were originally scheduled to end in 2025, but it was initially unclear when this would happen. However, this is unlikely to affect applications that have already been submitted.

Plastic products could become expensive

Products made from plastic could also become more expensive, as manufacturers will have to pay a plastic levy to the EU themselves in future, which is currently paid from tax revenues. This could amount to 1.4 billion euros. Manufacturers could pass on the additional costs to end consumers.

The Ministry of Finance emphasizes that this is actually a relief for taxpayers - because they would no longer have to finance the levy themselves through their taxes.

German domestic flights could become more expensive

The current tax exemption for kerosene has also long been regarded by many environmental organizations as a climate-damaging subsidy. The Ministry of Economic Affairs and Climate Protection has now stated: "Among other things, we will tax kerosene in domestic air traffic in future." This would strengthen climate protection. According to reports, this would only be possible for domestic German flights - and it could have an impact on air fares. However, the final word does not yet seem to have been spoken in the coalition.

The Federal Association of the German Air Transport Industry criticized: "Germany is already lagging far behind almost all other European and non-European countries in the revival of air traffic since the pandemic." In this situation, making feeder traffic to German hubs more expensive by going it alone on a national level is not a good idea. It would shift traffic to other European and international countries.

Tax concessions for farmers to be abolished

Ampel also wants to cut tax concessions for farmers and foresters. Currently, such businesses can apply for a refund of part of the energy tax paid on their fuel consumption. In addition, agricultural and forestry vehicles are exempt from vehicle tax.

Agriculture Minister Cem Özdemir expressed reservations about possible far-reaching savings. He had always warned against placing a disproportionate burden on agriculture, said the Green politician. "If both agricultural diesel subsidies and vehicle tax exemptions are cut, this is the case. I think that is problematic." This would be a competitive disadvantage compared to other countries that offer comparable subsidies.

What will not be changed

During the negotiations, many had feared cuts in the social sector in particular. However, these are now largely absent. The basic child benefit is to start in 2025 as planned. The citizen's income will also be increased as planned at the turn of the year. However, a bonus will reportedly be cut here. It is about 75 euros per month for those who take part in measures that provide particular support in finding their way back into work in the long term.

Some subsidies classified by environmental associations as harmful to the climate will also remain in place. These include, for example, the tax advantage for diesel fuel and the company car allowance, which critics believe promotes the sale of large combustion cars and benefits upper income groups. The commuter allowance will also not be changed.

The coalition is also no longer touching the main features of its painstakingly negotiated compromise on the Heating Act - however, a so-called speed bonus for installing a new climate-friendly heating system will not be quite as high as planned. Despite the budget crisis, the coalition is also sticking to billions in subsidies for industrial projects in eastern Germany, including the Intel chip factories near Magdeburg and TSMC near Dresden.