How are governments using tax policy to respond to the energy price shock?

Steep rises in energy prices may warrant an exceptional fiscal policy response to help cushion living standards and assist firms – ideally targeted at the most vulnerable while preserving some price incentives to reduce energy consumption.

Governments’ responses so far have largely focused on price control (USD 162bn, or 66% of total value of support) of which 6% is targeted; it also tends to support rather than curb demand. This contrasts with responses focusing on income support measures (USD 84bn, or 34% of the total value of support), of which 73% is targeted.

Split by type of fuel (chart 2), USD 169bn, or 69% of total value of support, is directed at fossil fuel use, and USD 77bn or 31% at non-fossil fuel use. 

> Learn more: Tax Policy Reforms 2022

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