High Energy Costs Are Strangling Companies in Germany

For decades, BASF was not only Germany’s largest chemical company, but at times also the largest chemical group in the world. Beginning in 2022, and especially in 2023 and 2024, the company announced massive cost-cutting programs and job cuts in Germany, while at the same time investing billions in new plants in China. BASF justified this by pointing to high energy prices in Germany and Europe’s declining competitiveness. In February 2024, BASF stated that it would have to save an additional one billion euros per year at its Ludwigshafen site alone by the end of 2026; high energy costs, weak demand, and excessive production costs in Germany were explicitly cited. At the same time, BASF is investing up to 10 billion euros in its new integrated production site in Zhanjiang, China. Today, many see the BASF case as a symbol of how high energy costs and growing bureaucracy are weakening Germany as an industrial location and prompting major companies to shift growth and investment to Asia.

Many Companies Want to Leave

Germany’s economic output has been stagnating for seven years, and one of the causes is the massive rise in energy prices. In his book “Absturz. So retten wir Deutschland” (“Crash: How We Can Save Germany”), economist Daniel Stelter writes that, according to a survey, 63 percent of industrial companies see their competitiveness at risk. Among energy-intensive industrial companies, the figure is even higher. Among large energy-intensive companies with more than 500 employees, two-thirds are now planning to relocate.

Russia’s war against Ukraine plays a role. But the crisis began long before that, triggered by the so-called “Energiewende,” which began under Angela Merkel and was continued by Robert Habeck, who at the time served as Economy Minister for the Green Party. At its core, this........

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