Aiming better: Government support for households and firms during the energy crisis
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.
Published on June 06, 2023
In series:OECD Economic Policy Papersview more titles