The Costs of Natural Gas Dependency: Price Shocks, Inequality, and Public Policy

Mats Kröger, Maximilian Longmuir, Karsten Neuhoff () and Franziska Schütze

No 2010, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Natural gas prices in Germany saw a strong increase at the end of 2021, subsequently worsening with the start of the war in Ukraine in February 2022, raising concerns about the distributional consequences. Our study shows that low-income households are affected the most by the natural gas price increase. Low-income households pay at the median 11.70 percent of their equivalent income on gas bills, compared to 6.21 percent in 2020. Contrarily, high-income households pay at the median 2.41 percent, compared to 1.52 in 2020. Natural gas expenditures are higher for tenants in detached houses and in houses with no double glassing or thermal insulation. Our policy analysis builds on an exploration of new energy expenditure data in 2020 provided by the German Socio-Economic Panel, and shows that a well-targeted subsidy scheme can be more effective for reducing inequality and less costly than a subsidy for all households. Additionally, the introduction of a minimum energy-efficiency standard for buildings can help reduce inequality in the medium-term.

Keywords: Natural gas prices; income distribution; energy efficiency; building retrofit (search for similar items in EconPapers)
JEL-codes: D30 I38 Q41 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2022
New Economics Papers: this item is included in nep-cis, nep-ene, nep-reg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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