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

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

September 22, 2023

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Format: Chicago

Anil Ari, Philipp Engler, Gloria Li, Manasa Patnam, and Laura Valderrama. Energy Support for Firms in Europe: Best Practice Considerations and Recent Experience, (USA: International Monetary Fund, 2023) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Energy conservation, Energy prices, Energy pricing, Environment, Expenditure, Financial sector policy and analysis, Fuel prices, Prices, Solvency

Keywords: Annex II, Best practice consideration, Energy conservation, Energy crisis, Energy prices, Energy pricing, Energy subsidies, Energy support scheme, Europe, Financial support, Fuel prices, Price caps, Price signal, Russia’s invasion of Ukraine, Solvency, Support scheme

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/197
Stock No:

WPIEA2023197
ISBN:

9798400255007
ISSN:

1018-5941

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