German Government Defends Nuclear Tax

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Written by Martin Lynch, European Editor for Industrial Info (Galway, Ireland)--The German government is standing firm about plans to charge energy companies billions of euros to extend the life of their ageing nuclear power plants.

German chancellor Angela Merkel, who is in favour of extending the life of nuclear power plants, defended the government's decision to impose a controversial 'fuel-rod tax' that will cost German utilities 2.3 billion euros ($2.9 billion) a year until 2014. Merkel was reacting to last week's claims by E.ON AG (OTC:EONGY) (Dusseldorf, Germany), RWE AG (OTC:RWEOY) (Essen, Germany) and others, that the tax will harm Germany's productivity and reduce the money available for large-scale renewable energy projects. For additional information, see related August 17, 2010, article - German Energy Giants Warn Against Nuclear Tax. A final decision is due by the end of September.

In a television interview, Merkel said, "We [the government] proposed a tax on nuclear power plants, and as long as there is no other proposal on the table, the tax remains." She said that her government is in talks with the energy companies but the government had, so far, seen no alternative proposals to the tax. It is widely expected that Germany's nuclear plants will get a 10- to 15-year lifeline beyond their originally scheduled closure dates, but it remains to be seen how much the energy companies will have to pay for the privilege. For additional information, see related news item from June 10, 2010 - German Nuclear Tax to Cost Billions.

Merkel's comments will no doubt increase the current standoff between the government and Germany's industrial sector. Last week, 40 leading German CEOs, academics and public figures published an open letter in German newspapers that condemned the proposed tax.

"This is about securing the basis on which we live for tomorrow and Germany's ability to thrive as a place for business in future," the letter said. "It concerns all of us. Policies that aim to consolidate the budget with new energy taxes block necessary investment in the future. For example: the planned nuclear fuel tax or new increases in energy tax must not lead to future investments being prevented."

Merkel is an advocate for nuclear power and intends to scrap the decision by a previous government to close Germany's nuclear plants by 2021. "I am firmly convinced that it is necessary to allow the nuclear power plants to run longer," she said.

Germany's 17 nuclear plants are controlled and operated by E.ON, RWE, Vattenfall AB (Stockholm, Sweden) and Energie Baden-Württemberg AG (EnBW) (Karlsruhe, Germany). The power plants account for 26% of the country's energy consumption. For additional information, see October 19, 2009, article - Germany on Track to Extend Life of Nuclear Power Plants.

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