Laws put to the test: where bureaucracy reduction has failed so far

"Battling Bureaucracy Blues in Germany: Where Reduction Efforts Fall Short"

"(...) the obligation to register (...) can also be fulfilled (...) by the accommodated person using their identity card (...), their eID card (...) or their residence permit (...)." Article 1, para. 1a of the Bureaucracy Reduction Act III

Mounting administration folders and processing times stretching up to eight years – that's the current reality for new wind turbine installations in Germany. This situation arises due to the need for multiple authorizations from federal, state, and local authorities for each of the numerous heavy-duty transports required for construction. Each approval comes with a folder containing up to 200 pages. The German Minister of Justice, Marco Buschmann (FDP), has recently lamented that businesses in Germany are suffering from a "bureaucracy burn-out."

Bureaucracy Relief Act IV seeks to remedy the situation by at least the first half of 2024. With the introduction of number four, it becomes clear that this isn't the first attempt by a minister to tackle bureaucracy. Between 2016 and 2019, several Bureaucracy Relief Acts (BEG) were enacted, aimed at reducing paperwork, and particularly benefitting small and medium-sized enterprises, as bureaucracy frequently costs companies billions annually.

Consider an example: before 2020, accommodation providers required manual completion of a registration form during check-in. The BEG III enabled electronic fulfillment of this reporting obligation, leading to cost savings for the hospitality industry totaling 52 million euros per year. This information is highlighted in the 2020 annual report published by the National Regulatory Control Council, an independent body of experts monitoring reduction of bureaucracy.

"Combating symptoms, not underlying causes"

The problem lies in new regulations annulling the simplifications achieved thus far. The Supply Chain Act and property tax recalculation are prime examples. In the latter instance, estimates suggest about 100 million euros of bureaucratic costs for the economy. As Christoph Knill, an administrative and political scientist from Ludwig Maximilian University in Munich, points out their criticism, "This is treating symptoms rather than addressing underlying causes."

The bureaucracy cost index, introduced by the black-yellow government in 2012, serves to provide a visual representation of the burden placed on companies by government regulations. The lowest value on record was 96.96 in January 2022, and the current value stands at 98.41, hence the "burn-out."

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Despite efforts to cut red tape, newer regulations like the Supply Chain Act and property tax recalculation have inadvertently increased bureaucratic costs. Experts like Christoph Knill, an administrative and political scientist from Ludwig Maximilian University in Munich, are concerned that current measures only address symptoms, while not addressing the underlying causes.

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While efforts to reduce bureaucracy in Germany, particularly impacting areas such as wind turbine construction and other industries, have shown some positive results, there remain significant challenges. Here’s a summary of the effectiveness and challenges:

Effectiveness

1. General Reduction in Bureaucracy:
2. The Fourth Bureaucracy Reduction Act (BEG IV), effective as of January 1, 2025, will simplify administrative tasks for startups and employers partly by permitting digital agreements for open-ended employment contracts without compromising the written form requirement for fixed-term contracts.
3. Tech Sector:
4. In the tech sector, BEG IV is expected to have limited impact, but there is a growing recognition within the industry for a drastic simplification of startup administration. The industry advocates for centralized one-stop-shops for registration, funding applications, and regulatory compliance to minimize time spent on paperwork.

Challenges

1. Wind Turbine Construction:
2. Despite ongoing bureaucracy reduction efforts, the construction of wind turbines continues to face significant regulatory hurdles. The typical duration for planning and licensing a wind farm is between four to five years, which significantly obstructs onshore wind power expansion.
3. Federal states, such as Bavaria and Baden-Württemberg, lag behind in installing new turbines, leading to challenges in grid stability and uneven distribution. Strict regulations, such as Bavaria’s 10H-rule, which require a set minimum distance between wind farms and residential buildings, pose additional difficulties in licensing processes.
4. Regulatory Complexity:
5. The wind industry grapples with policy gaps and bureaucratic barriers, which contribute to the slow pace of implementation and construction. The frequent shortcomings in prior auctions strengthen reservations about Germany's capacity to meet near-term expansion targets.
6. Land Use and Lease Prices:
7. The escalating lease prices for construction sites due to heightened demand for licenses has started to negatively impact turbine annual revenue. Industry associations have advocated for setting a maximum price limit on land use to counteract this cost barrier to renewable energy expansion.

In summary, while there have been efforts to reduce bureaucracy in Germany, the construction of wind turbines and other sectors persistently encounter regulatory obstacles. Simplifying administrative tasks and regulatory frameworks is essential to accelerating renewable energy sources' expansion, including wind power.