Targeted, Implementable, and Practical Energy Relief Measures for Households in Europe
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Summary:
The recommended way of helping households during the ongoing European energy crisis is to allow price signals to operate freely while providing targeted compensation to the vulnerable. In practice, however, institutional, political, and technical constraints have led many European governments to adopt broad, price-suppressing measures, which impede the adjustment in demand, have high fiscal costs, and widen cross-country gaps in prices. This paper focuses on easy-to-implement, second-best policies. Bonuses or rebates on energy bills (that are not linked to the current volume of consumption) or block tariffs are simple options which would improve on the current policy design in many countries. To avoid stoking inflation, fiscal policy should not add to aggregate demand, so relief for energy bills should be targeted and coupled with offsetting fiscal measures. One option is to reclaim the relief from the better-off through income taxation, which would also make support more progressive.
Series:
Working Paper No. 2022/262
Subject:
Consumption Economic sectors Energy prices Energy pricing Expenditure Income National accounts Natural gas sector Prices
Frequency:
regular
English
Publication Date:
December 16, 2022
ISBN/ISSN:
9798400227400/1018-5941
Stock No:
WPIEA2022262
Format:
Paper
Pages:
24
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