IMF Working Papers Volume 2022 Issue 152: Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels (2022)

Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels

Author:

Mr. Anil Ari

Mr. Anil Ari
Search for other papers by Mr. Anil Ari in
Current site
Google Scholar
PubMed

https://orcid.org/0000-0002-8707-6985

Mr. Nicolas Arregui

Mr. Nicolas Arregui
Search for other papers by Mr. Nicolas Arregui in
Current site
Google Scholar
PubMed

Mr. Simon Black

Mr. Simon Black
Search for other papers by Mr. Simon Black in
Current site
Google Scholar
PubMed

Oya Celasun

Oya Celasunnull

Search for other papers by Oya Celasun in
Current site
Google Scholar
PubMed

Ms. Dora M Iakova

Ms. Dora M Iakova
Search for other papers by Ms. Dora M Iakova in
Current site
Google Scholar
PubMed

Ms. Aiko Mineshima

Ms. Aiko Mineshima
Search for other papers by Ms. Aiko Mineshima in
Current site
Google Scholar
PubMed

Victor Mylonas

Victor Mylonasnull

Search for other papers by Victor Mylonas in
Current site
Google Scholar
PubMed

Ian W.H. Parry

Ian W.H. Parrynull

Search for other papers by Ian W.H. Parry in
Current site
Google Scholar
PubMed

Iulia Teodoru

Iulia Teodoru
Search for other papers by Iulia Teodoru in
Current site
Google Scholar
PubMed

, and

Karlygash Zhunussova

Karlygash Zhunussova
Search for other papers by Karlygash Zhunussova in
Current site
Google Scholar
PubMed

Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 152

Publication Date:: 29 Jul 2022

DOI:: https://doi.org/10.5089/9798400214592.001

ISBN:: 9798400214592

ISSN:: 1018-5941

Pages:: 41

Keywords:: energy prices; price pass-through; household incidence; distributional analysis; social programs; carbon pricing; climate mitigation; price signal; natural gas price; fossil fuel price; price decomposition; Fuel prices; Natural gas sector; Inflation; Non-renewable resources; Europe; Global; electricity price; Energy conservation

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 152

Language:: English

Publication Date:: 29 Jul 2022

DOI:: https://doi.org/10.5089/9798400214592.001

ISBN:: 9798400214592

ISSN:: 1018-5941

Pages:: 41

Keywords:: energy prices; price pass-through; household incidence; distributional analysis; social programs; carbon pricing; climate mitigation; price signal; natural gas price; fossil fuel price; price decomposition; Fuel prices; Natural gas sector; Inflation; Non-renewable resources; Europe; Global; electricity price; Energy conservation

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Download PDF (3.1 MB) Download Epub

We estimate that the recent surge in international fossil fuel prices will raise European households’ cost of living in 2022 by close to 7 percent of consumption on average. Household burdens vary significantly across and within countries, but in most cases they are regressive. Policymakers have mostly responded to the shock with broad-based price-suppressing measures, including subsidies, tax reductions, and price controls. Going forward, the policy emphasis should shift rapidly towards allowing price signals to operate more freely and providing income relief to the vulnerable. The surge in energy prices will encourage energy conservation and investments in renewable energy, but the manyfold rise in natural gas prices could lead to a persistent switch towards coal. To ensure steady progress towards carbon emissions reduction goals, authorities could use the opportunity to strengthen carbon pricing when global fossil fuel prices decline in the future. Non-price incentives for investments in energy efficiency and renewable energy should also be enhanced, as envisaged in the RePowerEU plan.

Save
Email this content

Share Link

Copy this link, or click below to email it to a friend
Email this content
or copy the link directly:

https://www.elibrary.imf.org/view/journals/001/2022/152/001.2022.issue-152-en.xml
The link was not copied. Your current browser may not support copying via this button.

Link copied successfully

Collapse
Expand

IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

Topics

Countries

Series

About

Resources

Share Link

Metrics

Foresee