The payments made by extractive companies to gov- ernment agencies (see chapter 4) are offset by subsi- dies and tax benefits granted by the state to support companies. The grants for the hard coal mining indus- try (see chapter 6.a. and b.) is the only subsidy specifi- cally related to the extractive sector. Until 2018 the hard coal mining industry received subsidies for the sale of hard coal, compensation for the financial bur- den resulting from capacity adjustments and adapta- tion payments for socially-acceptable personnel reductions in the sector.
Extractive companies outside the hard coal mining subsector can benefit from further grants that are not specifically designed for the extractive sector (see chapter 6.c.), including concessions for energy and electricity taxes for production industry companies (see chapter 6.d.).
There are different definitions of the term subsidies at both national and international level, and several methodological approaches are used to tackle the topic. The term used here is based on the definition of the subsidy report of the Federal Government. According to this report, only directly budget-relevant subsidies (grants) of the Federal Government and tax concessions for private companies and economic sec- tors are considered. Information on subsidies granted at Federal State level are available in the subsidy re- ports of the Federal States (see Annex 5 of the Subsidy Report of the Federal Government).
Subsidies in the German hard coal industry 2017 and 2018
The German hard coal industry is not competitive, mainly because of geologically-related high production costs. An agreement was therefore reached in 2007 between the Federal Government, the hard coal-pro- ducing Federal States of North Rhine-Westphalia and Saarland, the RAG AG (the largest German coal mining corporation based in the Ruhr region) and the Mining, Chemical and Energy Industrial Trade Union (IG BCE) that the subsidised hard coal industry would be ter- minated in socially-responsible manner by the year 2018. The agreement was based on the Hard Coal Mining Financing Law of December 20, 2007 and on a framework agreement between the Federal Govern- ment, the hard coal-producing Federal States, the RAG AG and the IG BCE. The public sector grants temporary aid to promote sales (balancing the differ- ence between domestic production costs and the world market price) and to cope with the necessary decommissioning measures. The subsidies are gradu- ally reduced and ultimately cycled out, a move that also addresses climate protection and resource conservation.
Subsidies for the sale and closure of German hard coal from 2014 to 2018 (Federal Government amounts)
The number of employees is declining. At the beginning of 2008, 32,803 persons were employed in hard coal mining. By the end of 2018 the number of employees had been reduced to 3,349 employees. The number of persons entitled to adaptation payment is following this reduction trend, albeit with a time lag. Since more employees will be retiring after the last mine closures at the end of 2018 and a declining number of employees will still be needed after 2018 to complete the closure of mines, the current adapta- tion payment guidelines will still apply until 2027
In addition to the monitoring of the intended use of funds by the German Federal Office of Economics and Export Control in cooperation with external audi- tors, the German Federal Audit Office also reviews in- dividual adaptation payment on the basis of random samples within the framework of the Federal Office’s annual budget review.
Adaption Payment (Anpassungsgeld) 2014-2018 (Federal Governments amounts)
- Tax relief for companies (§ 54 EnergieStG, § 9 b StromStG):
If a production industry company applies for elec- tricity and energy tax concessions and its applica- tion is approved, it is granted a reduction of 25% of the tax rates on electricity, heating and the fuels used in its production facilities eligible for tax concession.
- Tax relief in the form of so-called peak compensa- tion (§ 55 EnergieStG, § 10 StromStG):
The additional burden of the “ecological tax reform” on production industry companies is lightened by a reduction in their energy and electricity taxes. Since the increase in revenues generated by the ecological tax reform also served to reduce the factor of “work” and contributed to companies paying less for employers’ contributions to pension insurance schemes in comparison to 1999, a comparative peak compensation calculation is carried out for companies in question. In order to avoid double re- lief for the employers’ pension insurance as well as for the energy used, saved pension contributions are taken into account in the calculation of the tax relief. The amount of relief is therefore calculated individually depending on the company, and is also capped at a maximum of 90% of the electricity tax paid and 90% of the tax share pursuant to § 55(3) of the EnergieStG. Prerequisites for claiming peak compensation are, among other things, evidence
of a certified energy management system and an annual energy intensity reduction (by a statutory value) achieved by all the plants of the production industry company. The comparative value is the av- erage energy intensity value for production industry companies between 2007 and 2012.
- Certain processes and procedures/manufacturer privilege (§ 9a StromStG, § 51 EnergieStG, §§ 26, 37, 44 and 47 EnergieStG):
Companies in the manufacturing industry can use electricity or energy products for specific, energy- intensive purposes (such as electrolysis, metal pro- duction, manufacture of glassware, etc.) and reduce their tax bills by 100%. In addition, companies that produce energy products on their own premises (refineries, gas extraction and coal mining compa- nies) can use these self-produced energy products tax-free (or obtain tax relief) for the purposes of maintaining operations within their own companies.