Energy tax exemptions, including for energy-intensive manufacturing which are
motivated by competitiveness considerations, were already reduced in the course of
the 2011-14 tax reform package (OECD 2012b; 2012c).
The output and employment effects of the current exemptions
are small overall, but can be considerable for individual
companies and sectors (Fraunhofer-ISI and Ecosys, 2015). Gradually removing the tax
exemptions, taking into account EU rules and according to a predetermined time schedule
would reduce uncertainty and strengthen incentives to invest in energy efficiency, while
limiting the costs of transition to new technologies and products.
This will become easier,if regulatory reforms foster innovation and structural change.
The removal of these tax exemptions would also help to reduce the economy-wide cost for
Germany to reach its CO2 emission targets. In any case, the authorities should carefully
monitor the real-economy effects to ensure that implemented policies are effective and
least-cost for the economy as a whole.