Cover IMF Working Papers
Targeted, Implementable, and Practical Energy Relief Measures for Households in Europe
Author:
Mr. Nicolas Arregui
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Oya Celasun 0000000404811396 https://isni.org/isni/0000000404811396 International Monetary Fund

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Ms. Dora M Iakova
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Ms. Aiko Mineshima
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Mr. Victor Mylonas 0000000404811396 https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. Frederik G Toscani
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Yu Ching Wong
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Mr. Li Zeng
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Jing Zhou 0000000404811396 https://isni.org/isni/0000000404811396 International Monetary Fund

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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 262
Language:
English
Publication Date:
16 Dec 2022
DOI:
https://doi.org/10.5089/9798400227400.001
ISBN:
9798400227400
ISSN:
1018-5941
Pages:
24
Keywords:
energy prices; price pass-through; household incidence; distributional analysis; social safety nets; energy cost support measure; I. consumer energy price inflation; price signal; price-suppressing measure; EU government; Energy pricing; Consumption; Natural gas sector; Income; Europe
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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 262