Energy Prices: Outbidding Competition of Harmful Aids

The traffic light party leaders Lars Klingbeil (left), Ricarda Lang, Christian Lindner

The problem is not the high energy prices, but the reaction of the federal government.

(Photo: dpa)

What’s wrong with the Freedom Party FDP? A look back at 1973 raises this question. At the time, the Yom Kippur War drove energy prices to record highs. Today, Russia’s invasion of Ukraine does that. Crucial difference: the reaction.

In the 1970s, the government still understood that higher prices are only a problem if you don’t deal with their consequences but with them. The FDP-led Federal Ministry of Economics had vehemently resisted distributing state money with the watering can. It’s different today: together with the SPD and the Greens, the Liberals have decided to ignore this important experience.

Instead, an outbidding competition of counterproductive state aid breaks ground. Whether it’s a fuel discount, a commuter allowance, a nine-euro ticket, an energy flat-rate or an energy cost subsidy for companies: all measures are less helpful than counterproductive. The government gambled away a triple dividend:

  • Rising prices are not the result of malice. Rather, they have an important signaling effect. If the state tampers with the signals, it stands in its own way. If you want to become independent of Russian energy, you should use as little of it as possible. Just why should citizens save energy when the state will cover the costs anyway?
    The government’s measures are temporary, yes. But it would be better for the renewables to become those liberating energies that the government has promised, rather than tomorrow.
  • Instead, the manipulation of the signals leads to a further increase in demand and thus in prices. Vladimir Putin will be particularly pleased about the tank discount. He can make good use of the additional income from the higher oil price.
  • And then there is also this climate change, which will hardly be stopped any faster if the state makes petrol and gas heating cheaper. The high prices would be the last chance to achieve the climate goals. The 1970s showed that the price signals lead to a significant increase in technological advances in energy use. This is exactly what Germany needs again in order to achieve the climate goals without massively forfeiting prosperity.

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Of course, it is correct to point out that the state has to cushion social hardship. Only then should he do it.

More: Relief packages from the federal government for high energy prices: The wrong people are benefiting

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