What does the CDU’s electricity tax cut mean for you?

The CDU/CSU-SPD government has announced plans to reduce Germany’s electricity tax to the European minimum. But the policy is unlikely to bring significant financial relief for households.

Merz promises electricity tax cut

Following the CDU’s damning electoral defeat in recent state elections, Chancellor Friedrich Merz is testing out some new policies around in the hope of winning back voter support.

The latest is a proposal to lower the electricity tax for households and businesses to the minimum rates permitted by EU law: 0,1 cents per kilowatt hour (kWh). Currently, rates for households in Germany sit at 2,05 cents per kWh.

Last year, the government initially said it would introduce electricity tax cuts for households and businesses, but then limited the cut to certain businesses, including manufacturing, agriculture and forestry and entirely U-turned on the cuts for households.

The initial cut was a central policy that the CDU used to attract voters in the lead-up to the February 2025 federal election.

Now, after CDU politicians returned from a two-day retreat, Merz told the dpa his party “[W]ant[s] to offer financial relief but also close a gap in our credibility". 

With German economic think tanks now predicting a 1,3 percent increase in GDP for 2026, the chancellor has said that this growth would be used to fund the tax cut.

How much will households save with the tax cut?

While the cut from 2,05 to 0,1 cents per kWh seems significant, households would only feel modest financial relief. 

This is because the electricity tax is only 5 percent of overall electricity costs for a household. The final amount that suppliers charge households also includes procurement and distribution costs, such as grid fees, alongside VAT.

For example, according to estimates from WDR, with the electricity tax cut, a two-person household in North Rhine-Westphalia could expect their annual bill to fall from 875,00 euros to 816,99 euros, a saving of just 58,01 euros. WDR estimates a one-person household would save 34,81 euros and a four-person household 98,62 euros per year.

What happens next?

On top of the small savings the electricity tax cut would bring for most households, there is also a question over whether it will move forward at all.

Federal Finance Minister Lars Klingbeil (SPD) is sceptical that Germany’s slight uptick in economic growth predictions will be enough to balance the books, or whether it could only fund a temporary tax cut.

This means that the coalition now has to discuss further how it might finance the policy and whether it is feasible. Households can expect to pay existing electricity prices in the meantime.