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

Anil Ari, Philipp Engler, Gloria Li, Manasa Patnam and Laura Valderrama

No 2023/197, IMF Working Papers from International Monetary Fund

Abstract: 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. Against this backdrop, this paper examines the case for government intervention and identifies best practices with a view to improving the design of existing energy support schemes, facilitating exit from those schemes, and preparing policymakers for a downside scenario in which energy prices flare up again. The paper argues that support should be limited in size, strictly temporary in nature, narrowly targeted, and accompanied by strong safeguards and conditionality, while preserving price signals as much as possible to encourage energy conservation. Finally, the paper reviews recent support schemes introduced by European governments in light of the identified best practice considerations.

Keywords: Energy prices; energy subsidies; financial support; price caps; energy crisis; Russia’s invasion of Ukraine; energy support scheme; price signal; best practice consideration; Annex II; support scheme; Energy pricing; Energy conservation; Fuel prices; Solvency; Europe (search for similar items in EconPapers)
Pages: 27
Date: 2023-09-22
New Economics Papers: this item is included in nep-cis, nep-ene, nep-reg and nep-tra
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