Many companies are groaning under the sharp increase in energy costs. There are narrow requirements for government grants. Managers have to forego bonuses.

A multi-billion dollar federal government aid program with energy cost subsidies for companies is set to start soon. It is on the home stretch, the German Press Agency learned from circles in the Federal Ministry of Economics. Five billion euros in funds are planned for this.

The aim is for the application to start in the next few weeks – the EU Commission still has to approve the program under state aid law. The notification process is ongoing. With the cost subsidy for particularly affected companies, the federal government wants to temporarily dampen the sharp rise in natural gas and electricity prices.

Companies do not have to pay back grants

A “strict bonus waiver rule” for management should ensure that only those companies that are in a real emergency “communalize” their costs. There was also a waiver of bonus payments from certain conditions for the bridging aid in the corona pandemic, as well as for the Economic Stabilization Fund. With this, the state supported large companies like Lufthansa during the pandemic.

The companies do not have to pay back the energy cost subsidy. From the circles of the Ministry of Economic Affairs it was said that the grants should support the most affected companies to an “appropriate extent” – but without promoting “with the watering can” and without this boosting natural gas consumption or triggering price-raising effects.

Specifically, a proportion of the additional energy costs are to be subsidized in February to September 2022 – provided that the price of natural gas or electricity has more than doubled. A tier system is planned, depending on how needy the company is.

According to an EU subsidy guideline, companies from an energy and trade-intensive industry should receive 30 percent of the price difference and up to 2 million euros if they can prove that energy procurement costs account for at least 3 percent of the total costs. 50 percent of the price difference and up to 25 million should get companies that also prove an operating loss in the respective month due to the additional energy costs. Particularly energy-intensive companies in the chemical, glass, steel or metal industries are to receive 70 percent of the price difference and up to 50 million euros. The percentage funding is to be reduced once in July by 10 percentage points for the remainder of the program.

No comprehensive protection

The subsidy program is part of an aid package presented by the Ministry of Economy and Finance in April for companies that are particularly affected by the consequences of the Ukraine war and the increase in energy costs. This also includes a loan program via the state development bank KfW, which has already started.

The aid package is not comprehensive protection. Finance Minister Christian Lindner (FDP) spoke of an economic policy “shock absorber” in April. Economics Minister Robert Habeck (Greens) had said that there was no “total assumption of costs” by the state. It is important that companies can survive, but the state cannot relieve them of every burden. This would take the pressure off companies to innovate.