Aiming better: Government support for households and firms during the energy crisis

Yannick Hemmerlé, Enes Sunel, Filippo Maria D’Arcangelo, Tobias Kruse, David Haugh, Álvaro Pina, Mauro Pisu, Cassandra Castle and Giuliana Sarcina

No 32, OECD Economic Policy Papers from OECD Publishing

Abstract: Governments rapidly provided large support to help households and firms face the 2021-22 energy price crisis. Drawing on the OECD Energy Support Measures Tracker and country case studies, this paper documents countries’ policy responses and draws lessons for enhancing countries’ preparedness to future energy price shocks. Support implemented or announced by countries so far has been largely untargeted and often fiscally costly. As such it might add to inflationary pressures and in many cases reduce incentives to save energy and transition away from fossil fuels. Reliance on imported energy, technical obstacles to implement a targeted approach and political economy constraints help explain the type of support countries provided. There is now a case for withdrawing broad-based energy support, given the recent moderation in energy prices and ongoing or planned minimum-wage and welfare-benefit increases to compensate for high inflation. Digitalisation would help improve the quality of support countries can provide to face a future energy or other crisis by speeding up payment delivery and facilitating a more targeted approach based on vulnerability factors beyond low income, such as the inability to renovate an energy-inefficient home. Ensuring that support measures maintain incentives for energy savings and encourage energy diversification, combined with investments to accelerate the green transition, is key to reducing vulnerability to energy price shocks.

Keywords: Energy demand; Energy prices; Energy supply; Environment; Fiscal Policy; Government Budget; Government Expenditure; Social Assistance; Welfare programmes (search for similar items in EconPapers)
JEL-codes: H31 H32 H53 H61 I38 P18 Q41 Q43 Q48 (search for similar items in EconPapers)
Date: 2023-06-06
New Economics Papers: this item is included in nep-ene and nep-inv
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