Hauke Benner – Germany’s New Energy Security Act: A “sharp sword” in favour of the energy companies

The gas situation in Germany is out of control. The traffic light government is letting down its citizens to support corporate profits.

Hauke Benner is a former journalist and decade long activist against climate change.

Translated and edited by BRAVE NEW EUROPE

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Deputy Prime Minister & Minister of Foreign Affairs Mohammed bin Abdulrahman Al-Thani meets Dr. Robert Habeck, German Vice Chancellor & Federal Minister for Economic Affairs & Climate Action in Doha on 20 March 2022 [MBA_AlThani_/Twitter]

For weeks, German media have been full of horror stories about the impending gas crisis due to the war in Ukraine “Freezing because of Putin” is the unanimous tenor. The Russian state-owned company Gazprom has significantly reduced deliveries to Central Europe since the start of the Ukraine war and the EU sanctions. Now it is threatening a complete halt to deliveries. Germany obtains 50% of its gas imports from Russia.

In order to avert the looming energy crisis, the German Bundestag at the beginning of July revised the Energy Security Act (EnSiG), which has existed since 1975. According to this law, the state can intervene extensively in the market in the event of a declared “emergency” in the gas supply.

This includes the “sharpest sword”, according to the Green Economic Affairs Minister Robert Habeck: the state administration or expropriation of individual energy companies. Other important tools included in the law are setting price ceilings or prescribing the allocation of gas supply to companies and private households.

Prior to this amendment, the Green politician Habeck announced that the top priority was to secure the gas supply for private households and that no one would have to “freeze” in the coming winter. But as with many of Habeck’s declared plans in recent months, the fine and reassuring words were soon followed by half-hearted political implementation. A few days after the amendment of the EnSiG, Habeck backed away from the “prioritisation” in the supply for private households, explaining lamely that consumers would also have to “do their share”. “The European Emergency Gas Regulation provides that critical infrastructure and consumers are protected and industry and business are not,” Habeck said. This makes sense in the case of short-term and regional problems, he said. “But that is not the scenario we have right now,” he continued, “We are talking potentially about months of interruption of gas flows.”

The “interests of the companies would also have to be taken into account” was immediately heard from circles of business lobbyists and the coalition member Liberals (FDP), claiming there was a threat of a massive economic collapse; for example, the largest German chemical company BASF is heavily dependent on a secure gas supply for the production of fertilisers and plastic raw materials and could close down its mega-factory in Ludwigshafen. Of course, this would not be acceptable to the corporate friends of Germany’s the traffic light coalition. So: everything as usual, as long as possible the market should regulate prices and quantities.

When the bill was passed in the Bundestag, FDP parliamentarian Michael Kruse hailed the “price signal” that must remain in place “so that the corresponding adjustment processes can take place as efficiently as possible in a market economy”.

But what the FDP backbencher and also Habeck do not say is that the “price signals” have been completely out of control since autumn 2021. By December 2021 the gas price on the European markets had risen fourfold (!) compared to January 2021.

How did this come about?

The explanation is relatively simple. The large energy companies such as Exxon, Royal Dutch, Total, all of which are massively involved in gas trading in addition to the oil business, but above all also the German-Finnish gas supplier Uniper (a former subsidiary of the Eon Group) and numerous municipal utilities had cancelled their long-term supply contracts (with Gazprom, among others) in the wake of the Corona-related economic slump and speculated in the significantly cheaper spot market in 2020 and the first half of 2021. This initially ensured high profits for these companies.

But when the European economy started to pick up again in autumn 2021, obviosly unexpectedly for the gas companies, and global demand for gas increased, prices on the spot markets shot through the roof and companies like Uniper experienced considerable difficulties because their industrial customers had long-term, low-price supply contracts. In order to fulfil these contracts, Uniper had to buy at much higher prices on the spot market. Today Uniper is losing tens of millions of euros a day as a result and is on the verge of insolvency. And what happened? Because of the EnSiG, Habeck stepped in and put Uniper under a government “protective umbrella”. This company is simply too important for the German gas supply to go under according to the laws of the market; even the market radicals from the FDP cannot allow that. Then a few billion in taxpayers’ money will simply be pushed over. On the other hand, this is exactly the fate that threatens many much smaller municipal utilities that are stuck in a similar straitjacket. This is the responsibility of the “federal states and municipalities”, Habeck said a few days ago, once again trying to evade adopting a policy.

The “price signals” are also effective thanks to the newly formulated Article 24 in the EnSiG. According to this article, suppliers, such as municipal utilities, can pass on their increased gas purchase prices to customers in full within one week in an “emergency”, which has already been declared by the federal government. This has resulted in regional price increases of 70-100% so far this year. And the end of the price spiral is not in sight. For an average four-person household, this amounts to an annual additional burden of 2-3000 euros. Of course, the millions of poorer households in Germany cannot cope with that. But so far the traffic light coalition refuses to pay effective monthly energy subsidies. Instead, not a day goes by without Minister Habeck trumpeting new energy-saving appeals. Of course, he does not take the “sharp sword”, such as setting price ceilings, in his hands; the FDP is watching over that.

It is astonishing that there is no debate on energy price speculation in the Bundestag, except by individual members of the Left Party. Critical economists such as Claudia Kemfert from the  highly respected German economic think tank DIW or the former economist at UNCTAD, Heiner Flassbeck, have made concrete proposals in recent months to curb the energy speculation markets. The tool that could be used very effectively to curb global speculation worth billions would be a transaction tax on futures transactions for gas, oil and electricity. The academics have calculated that only a few hundredths of a percent on each transaction would be enough to put an end to this speculation. It is like on the world financial market, many speculative transactions take place in computer-controlled high-frequency trading on the futures markets such as in Paris, Leipzig or New York. And by far not only demand or suppliers of energy are involved in this, only 3-7 % of all concluded “futures” (these are, simply put, tradable promises of offers or deliveries) are concluded with a delivery. The rest is pure speculation, and of course banks and hedge funds are also in on the action.

The profits from these deals were extraordinary. This year alone, Tax Justice Network estimates the industry’s extra profits worldwide at up to 1.6 trillion euros. Among them, the extra profits for the gas companies since the beginning of the Russian sanctions are estimated at 1 trillion euros.

No wonder that some states in the EU are bringing a so-called “excess profits tax” into play. The Spanish government hopes that this will raise a few additional billions and support poorer households.

But most of the big oil and gas companies tax only portions of their profits in the producing countries, the rest in tax havens. The EU and Germany would only receive fractions of the profits. At first glance, the reform of corporate taxation, which 137 countries agreed on last autumn, could help. The agreement grants many natiions more taxation rights. But conveniently commodity corporations were excluded from this reform.

What are the alternatives?

First and foremost, the immediate cessation of all acts of war combined with the end of the sanctions policy would be a clear signal to the energy markets.

2. the introduction of a transaction tax on all futures markets worldwide and the prohibition of high-frequency trading, which can hardly be controlled.

3. in Germany, a forced expansion of alternative electricity and heat production. This also includes the development of geothermal energy. In the Upper Rhine Graben there are large heat sources that are technically easy to tap. These could replace a large part of the gas imported from Russia as a heat source, e.g. for heating houses.

4. energy must no longer be a commodity. Everyone has a right to an adequate basic supply. However, this requires a debate about what is adequate. Surely SUV’s, large villas or luxury yachts would be excluded from this.

5. disempower the energy companies as a first step and then break them up and finally price in the ecological consequential costs.

6. shut down or convert the big ‘energy guzzlers’ in industry, such as the chemical, steel, and aluminium factories. For example, we don’t need pesticides and huge amounts of fertiliser in organic farming; plastic packaging can be done away with; if far fewer cars are needed, the steel and aluminium industries will lose a significant business sector.

7. everything is already feasible today and does not even require a change of system, a turning away from capitalism; but is merely a first necessary restructuring with regard to a climate-neutral economy.

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