EU Allows 70% Fuel Bill Subsidies Amid Iran Energy Shock, Germany Benefits
The EU Commission is allowing governments to cover 70% of increased fuel bills due to the US-Israeli-Iran war, potentially reigniting internal tensions. This temporary measure, METSAF, benefits sectors like farming and Germany’s heavy industry. It aims to mitigate the €27 billion extra cost Europeans paid for fuel in the war's first 60 days.
The European Commission has granted EU governments broad latitude to subsidize fuel costs in response to the energy price spike caused by the US-Israeli-Iran war. This move, which could reignite tensions among member states, allows countries to cover 70% of increased fuel bills for sectors like farming, fisheries, and trucking.
During the first 60 days of the war, Europeans paid an extra €27 billion for fuel, while governments spent only €10 billion on countermeasures. The temporary state aid framework, known as METSAF, will remain until year-end, though its duration may be extended depending on the crisis. Power bills can also be subsidized by 70% for half of firms’ consumption, down to €50 per megawatt-hour.
Germany's heavy industry is set to be a major beneficiary, receiving permission to subsidize firms for extra costs from the bloc’s carbon price and through a new subsidized ‘industrial power price’. German Economy Minister Katherina Reiche welcomed the easing of restrictions, stating that longer-term relief measures aid industrial planning. This continues a trend of ‘extraordinary’ state aid frameworks since the 2020 pandemic.