Germany coalition deal fails to address key industry concerns: VCI

27 November 2013 15:23  [Source: ICIS news]

LONDON (ICIS)--Germany’s chemical industry trade group VCI said on Wednesday that a deal reached by Chancellor Angela Merkel’s ruling Christian Democrats to form a new coalition government with the Social Democrats fails to address key industry concerns.

The two parties published their pact for a new government on Wednesday after negotiating since September when the Christian Democrats won a federal election but did not obtain a majority of seats in parliament. Merkel’s previous partner, the Free Democrats, failed to win enough seats to be represented in parliament.

However, VCI said that measures on energy policy outlined in the coalition government pact would not bring the hope-for reform of the country’s costly system - known as "EEG-Umlage" - of subsidising the build-up of renewable energies through surcharges on electricity prices.

Also, it remains unclear whether large energy-intensive firms such as chemical producers will continue to retain exemptions they have under the current system, VCI said.

In their 185-page pact, known as "Koalitionsvertrag", the Christian Democrats and the Social Democrats said that Germany’s energy transition ("Energiewende") to exit nuclear power and build up renewables could not be achieved for free.

However, they acknowledged the high costs of the EEG-Umlage for consumers and in particular for small and medium-sized producers, and they said that they were aiming to achieve a "fundamental reform" of the system by the summer of 2014.

VCI also said that it is disappointed that the coalition government could not agree on tax incentives to promote investments in research and development.

The new government had missed out on an opportunity to create incentives for innovation that would be comparable with those in other European countries, said VCI general manager Utz Tillmann.

However, VCI welcomed the coalitions’ agreement on tax incentives for renovations to improve the energy efficiency of buildings, it said.

Also, the new government’s plans to promote biotechnologies that support the economy’s resource-efficiency are "generally on the right track," said Matthias Braun, head of VCI’s biotechnology portfolio.

In another measure of relevance to the chemical industry, the new government agreed not to allow the use of hydraulic fracturing (fracking) to explore and produce shale gas.

Fracking had "significant risk potentials", in particular for drinking water resources, which needed to be addressed before decisions to grant permits to use the technology could be made, the parties said in their agreement.

German chemical industry leaders have called on the country to keep an open mind about shale gas production, which has given the US chemical industry a huge competitive advantage and keeps drawing investments from Germany to the US.

Frankfurt-based VCI represents about 1,650 chemical firms.

By: Stefan Baumgarten
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