Newsweek: "Germany Could Pay Everyone's December Gas Bill"

A story about Germany's plan to deal with likely winter energy scarcity is aided by insight from RFF Senior Felllows Dallas Burtraw and Karen Palmer.

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Oct. 11, 2022

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Dallas Burtraw, senior fellow at Washington-based, non-profit research institution Resources for the Future, told Newsweek he doesn't anticipate "direct subsidies for electric bills could surface in the U.S., although this may be due to the fact that price changes in the U.S. unfold differently."

Burtraw explains that the way Germans pay for their energy bills puts them in a very different situation than Americans.

"In Germany, many households and businesses subscribe to electricity services in a competitive market. If the customer has a short-term contract, then changes in fuel prices that raise electricity costs click in when the contract rolls over," Burtraw said.

But focusing on electricity bills, Burtraw said "there are plenty of examples of indirect support for electricity customers or low income households" in the U.S.

The Inflation Reduction Act, for example, the recent large climate-related legislation pushed forward by the Biden administration, "will reduce national average electricity prices by supporting lower cost renewable generation and by shifting system costs from electricity customers to taxpayers."

According to Karen Palmer, senior fellow at Resources for the Future, the Inflation Reduction Act "perpetuates tax credits for wind and solar and other sources of clean energy into the future" for likely ten years or more according to the U.S. meeting its climate goals.

"And those tax credits are essentially paid for by taxpayers, and they end up lowering electricity rates relatively to what they would have been if we hadn't had this bill passed," she told Newsweek.

This act shields American households from drastic price variations but are far from being an emergency program.

"The Inflation Reduction Act decreases the importance of natural gas and electricity supply and therefore decreases exposure of customers to variations in that price," said Palmer. "It's a way of addressing household electricity cost, but more of a longer-term thing than what's happening in in Germany right now."

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