## Energy Support for Firms in Europe: Best Practice Considerations and Recent Experience

_IMF Working Papers, September 22, 2023_

## Source details

**Canonical URL:** [Energy Support for Firms in Europe: Best Practice Considerations and Recent Experience](https://www.imf.org/en/publications/wp/issues/2023/09/22/energy-support-for-firms-in-europe-best-practice-considerations-and-recent-experience-539372)

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## Bibliographic details
- Authors: Anil Ari, Philipp Engler, Gloria Li, Manasa Patnam, Laura Valderrama
- Published: September 22, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400255007.001

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### Overview
- The surge in energy prices due to Russia’s February 2022 invasion of Ukraine significantly increased costs for European firms, prompting governments to introduce a range of support schemes.
- Although energy prices had eased by early 2023, uncertainty around prices remains unusually large.
- The paper examines the case for government intervention and identifies best practices to:
  - improve the design of existing energy support schemes;
  - facilitate exit from those schemes; and
  - prepare policymakers for a downside scenario in which energy prices flare up again.

### Key findings
- Support should be:
  - limited in size;
  - strictly temporary in nature;
  - narrowly targeted; and
  - accompanied by strong safeguards and conditionality.
- Preserve price signals as much as possible to encourage energy conservation.
- The paper reviews recent support schemes introduced by European governments in light of the identified best practice considerations.

### Policy recommendations and design principles
- Limit the size of support to reduce fiscal costs and distortions.
- Ensure strict temporariness to avoid long-term market distortions.
- Target support narrowly to firms most affected to preserve incentives for efficient energy use.
- Implement strong safeguards and conditionality to protect public resources and limit misuse.
- Preserve price signals where feasible to encourage energy conservation and efficient resource allocation.
- Prepare contingency plans for a downside scenario of renewed energy price spikes.

### Scope and framing
- Focus: case for government intervention in firm-level energy support and best-practice design considerations.
- Analytical goals:
  - Improve existing scheme design.
  - Facilitate orderly exit from schemes.
  - Prepare for potential future energy price flare-ups.
- The paper also conducts a review of recent support schemes in Europe against the identified best-practice considerations.

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2023/09/22/energy-support-for-firms-in-europe-best-practice-considerations-and-recent-experience-539372_