German chems warn government on reducing energy tax reliefs

07 July 2010 18:57  [Source: ICIS news]

TORONTO (ICIS news)--Germany’s chemical industry is opposed to a government move to reduce breaks on energy taxes for the country’s manufacturing sector, a chemical trade group said on Wednesday.

The coalition government under Chancellor Angela Merkel plans to reduce the breaks as part of its €80bn ($101bn) savings package announced last month. The breaks, enacted in 1999 a part of an "eco tax", are linked to the industry meeting greenhouse gas emission reduction targets.

Without the breaks, the chemical industry could face an additional €1bn/year in energy taxes, further adding to its already very high energy costs, Frankfurt-based trade group Verband der Chemischen Industrie (VCI) said in a statement. 

“Affordable prices for electricity and gas are a major location factor for energy-intensive industries in Germany,” said VCI president Ulrich Lehner.

The chemical industry, for its part, had in fact reduced its climate-relevant emissions by 37% and its energy consumption by 18% from 1990 to 2008, while it increased production by 58% over the same period, Lehner said.

“Comparative studies by the International Council of Chemical Associations (ICCA) show that chemical production is more energy-efficient in Germany than in any other region globally,” he said.

In was now up to Germany’s politicians to stand by the agreement from 1999 and ensure that energy tax reliefs remained in place.

Additional costs from energy taxes would lead to the industry losing in competitiveness, more pressure from imports and, finally, less economic growth, Lehner said.

While overall the chemical industry welcomed the government’s focus on reducing public debt, those cuts need not go at the expense of growth, he said.

“The German federal government should be sure not to take any measures which slow down economic growth, because [growth] is and remains the most important factor for reducing debt,” he said.

Industrial production was the primary driver of growth. Therefore, German politicians were well-advised to strengthen the country as a location for industrial production whenever possible, Lehner said.

In related news on Wednesday, VCI said that Germany’s chemical production rose 13% in the first half of 2010, compared with the first half of 2009.

However, the group said it expected production to grow at a slower pace in the second half of 2010. The group maintained its earlier forecast of 8.5% full-year 2010 chemical production growth. In 2009, chemical production fell 10% from 2008.

The chemical industry is Germany’s fourth largest industry. VCI represent 1,650 Germany-based chemical firms that employ over 416,000 people.

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By: Stefan Baumgarten
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