Governments in Europe have allocated nearly €500 billion over the past year to protect citizens and companies from rising gas and electricity prices.
This is stated in a study by the Brussels-based economic think tank Bruegel, quoted by Reuters.
The surge in prices has led governments to introduce measures to limit the rise in retail electricity prices, cut energy taxes and provide subsidies to billpayers.
European gas and electricity prices jumped after Russia cut fuel exports to retaliate against Western sanctions over its invasion of Ukraine.
The 27 EU countries have collectively allocated €314 billion to pain relief measures, with the UK a further €178 billion.
If the cash that governments set aside to nationalize, bail out or provide loans to struggling energy companies is included, the sum rises to almost €450 billion.
Germany nationalized gas importer Juniper on Wednesday and Britain capped wholesale electricity and gas prices for businesses.
Many of the measures were supposed to be temporary, but according to Bruegel, state intervention has increased to become “structural”, which is not sustainable concerning public finances.
“Governments with more fiscal space will inevitably manage the energy crisis better by competing with their neighbors for limited energy resources during the winter months,” Bruegel’s Simone Tagliapietra told Reuters.
Germany, the largest economy in the EU, also has the largest compensation budget, setting aside 100 billion euros, compared to 59 billion euros in Italy or 200 million euros in Estonia, for example.
Croatia, Greece, Italy, and Latvia have set aside more than 3% of their GDP to address the energy crisis. According to the study, Bulgaria, which has the lowest GDP in the EU, spent just over 2.5% of it on energy compensation between September 2021 and last July.
Last week, the European Commission proposed bloc-wide measures in response to skyrocketing energy prices that envisage peak-hour energy savings and channeling energy producers’ surplus profits into compensatory measures for end-users.
How the EU will save electricity and gas this winter
Swiss authorities have launched an investigation into the origins of a prominently displayed poster calling on citizens to report their neighbors leaving their heating at more than 19 degrees, offering a cash reward for alertness.
The government said it was a fake and that it had no such intentions, although the poster listed a phone number for the Department of Energy.
“The federal government has nothing to do with this appeal and officially dissociates itself from it. There are no such government posters or similar intentions, it is a matter of manipulation,” the government said.
Reuters reported on Thursday, citing experts that the action was part of Russian information warfare and that the photo of the young woman with a phone in her hand behind the call to report the neighbor was photoshopped.
The post led to Russian accounts, but even if no concrete leads are found, there’s no denying that the timing was apt – the European Commission announced on Wednesday that it will ask EU countries to introduce limits on electricity consumption to make savings.
Switzerland also announced an energy-saving program, following the European example of voluntary curbs on natural gas consumption, which the EU adopted in July for a voluntary 15% reduction.
After gas, it’s time for electricity
Many European countries did not wait for the extraordinary meeting of the EU energy ministers, who on September 30 must approve the consumption savings and taxation of energy producers proposed by the European Commission, and have already announced their plans, how they will use the money to reduce the bills of end users.
Brussels proposes that producers of electricity and fossil fuels (oil and gas) contribute to the state budget their surplus profits from sales above a fixed price of 180 euros per megawatt hour. From the expected revenues of 140 billion euros, governments will be able to free up funds for measures to compensate end users for the skyrocketing prices. The problem is that in some countries the producers are many and big, and others will rely on less money from the energy companies to compensate the consumers.
France – electricity cap, gas freeze
France will set an energy price cap for 2023 and freeze gas prices to help consumers.
“We will not leave the French alone to deal with the surge in gas and electricity prices,” Finance Minister Bruno Le Maire told CNews television.
The government decided on Wednesday that the increase in the price of electricity and gas for households will be limited to 15%, and the poorest 12 million households will receive an additional check of up to 200 euros. The cap price for gas will come into effect in January, and for electricity – a month later.
France, which has the most nuclear reactors in Europe, could cope with fluctuating Russian gas supplies and an oil embargo starting at the end of the year without a problem if it weren’t for the drought and nuclear breakdowns that have pushed levels to record lows. electricity production from nuclear power plants since 30
Half of Electriques de France’s (EDF) nuclear reactors are currently offline due to corrosion problems and regular maintenance, and fears that not all will be ready before take-off has boosted market prices.
Meanwhile, national network operator RTE said there was no risk of a total blackout over the winter, but that peak-time blackout could not be completely ruled out.
The government has already capped increases in regulated electricity prices this year to 4%, cutting taxes that are usually included in the electricity bills of consumers and small businesses and ordering EDF to sell more electricity below market prices.
The measures will cost the budget 16.5 billion euros and 8 billion euros for EDF. Adding the discount on the price of gasoline, the bill for high energy prices reaches 24 billion euros – 1% of France’s GDP.
Guaranteed price and bonuses for the thrifty in Poland
The Polish government will cap electricity prices for all households, providing them with a minimum consumption at a fixed price. Practically, this will be a freezing of the current price, as those who exceed the limit pay more for their consumption.
From January, with a consumption of up to 2,000 kWh per year, a more favorable tariff will be available, BTA reported.
The guaranteed price will apply to all private subscribers, regardless of income, but for households with disabled people or three or more children – the limit will be increased to 2,600 kWh per year.
According to Prime Minister Mateusz Morawiecki, this will allow households to save up to 150 zlotys (32 euros) a month on their electricity bills, and 66% of them will not feel whether electricity will become even more expensive in winter.
Households that manage to reduce their energy consumption by at least 10% during the year will receive an additional 10% discount with the equalization bill.
At the same time, state and municipal services will be obliged to reduce their consumption by 10%.
The government is already implementing tax breaks and subsidizing the price of motor fuels and coal households, as well as municipalities that are entirely dependent on coal. The price of the commodity jumped after a ban on coal imports from Russia came into force in August as part of EU sanctions over the war in Ukraine.
The compensations, including those for businesses, will cost the Polish budget at least 30 billion zlotys (6.36 billion euros).
Ireland – aid versus austerity
Most of Ireland’s budget surplus will go towards one-off measures to help consumers and businesses cope with rising energy prices.They are expected to cost around 5 billion euros, or 2% of GDP, and include, in addition to compensation, cheap loans, and grants aimed at the most affected sectors, such as retail and hospitality. To access them, the business will have to try to reduce consumption.
“We haven’t finalized everything yet, we have to see what happens at the European level,” Deputy Prime Minister Leo Varadkar said.
The government will approve the package on September 27.
Denmark – deferred payment
The Danish government has proposed a temporary cap on gas, electricity, and central heating costs this winter.
Prime Minister Mette Frederiksen said consumers with bills above the threshold would be allowed to delay paying part of the difference as a way to help them manage costs.
According to Finance Minister Nikolay Vamen, the measures will cost the treasury about 45 billion Danish kroner (6 billion euros).
Czech Republic – fixed price for private users
The Czech government has announced that it will cap electricity and gas prices next year.
“We guarantee the price level. Everyone will know what they will pay and it will be impossible for anyone to pay much more than what they are paying now,” Prime Minister Peter Fiala assured.
For households, the price of electricity will be fixed at 6 kroner (0.25 euro) per kilowatt hour. Gas will cost 3 crowns. The changes will take effect from November when Czechs pay their deposit for December bills.
The public sector, including hospitals, municipalities, or schools, will have a guaranteed supply at the same prices as private consumers.
Network services are not included in the capped price and will be charged extra, increasing the final bill.
When adjusted for taxes, the Czech electricity price cap corresponds to about 200 euros per megawatt hour – a price level mentioned in the European Commission’s proposals to cap the price for electricity producers that do not use natural gas, Reuters wrote.
That’s well above pre-war prices, but also well below Monday’s market prices for German delivery in 2023, which stood at €479.
Finance Minister Zbinek Stanjura said the restrictions will cost the state up to 130 billion crowns (5.4 billion euros) next year.
The cap is to be funded by a windfall tax the government plans to collect from energy companies, oil refiners, banks, and fuel and electricity traders. It is expected that they will return about 70 billion crowns (2.9 billion euros) to the budget next year.
Portugal – regulated tariffs
Portugal is already passing on hundreds of millions of euros of windfall profits from power and gas companies to consumers and sees no immediate need for a windfall tax, its finance minister said.
Fernando Medina said the recently created “Iberian Mechanism”, an agreement with the EU to decouple electricity prices from rising gas prices, already contained a direct transfer of windfall profits from non-gas power plants to lower regulated tariffs.
“We are already cutting profits from the electricity sector and passing them on to consumers… and we will do the same with the gas sector,” Medina told parliament.
The 1.4 million households and small businesses that buy natural gas on the liberalized market will soon benefit from the same arrangement as the government allowed households to switch to regulated tariffs to avoid huge price increases from October 1.
Between June 15 and August 15, through the “Iberian mechanism” (the price of gas is no longer a price determinant for electricity) it has reduced the tariffs paid by consumers by 150 million euros and the projected savings could reach 500 million euros by the end of the year.
“These 500 million euros will not be on the companies’ balance sheets as windfall profits and will be transferred directly to consumers,” the minister assured, promising that neither consumers nor the state would pay for the mechanism in the future.
If all households and small businesses switch to regulated prices, even after the increases in natural gas bills announced by the companies, consumers could save 630 million euros by the end of the year, Lisbon authorities estimate.
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