In its first publication of 2024, the pro-European think-tank Bruegel looked on Thursday 11 January at the subsidies and tax exemptions applied separately by the governments of the Member States to reduce electricity prices.
Now that the peak of the energy crisis has passed, these interventions in electricity pricing are taking place in a context of industrial competition, as illustrated by the reform of nuclear energy pricing in France and the debate in Germany on subsidising electricity prices for energy-intensive businesses.
Bruegel has identified several “distributional dilemmas” concerning the recovery of electricity expenses, such as the split between households and businesses and the split between energy-intensive businesses and those that are not.
In its analysis, Bruegel concluded that governments must recognise that efforts to artificially lower prices for one group of consumers will increase prices for other groups, with cross-border implications.
Regarding France and Germany, “the current compromises (...) do not pose substantial issues to the integrity of the European single market and do not penalise non-energy-intensive domestic consumers excessively”, since the two countries have so far “resisted the temptation to generously subsidise energy-intensive industry”, the analysis summarises.
Bruegel believes that the current debates show that electricity is central to industrial policy, and that this will be even more true in the years to come, as the share of electricity in final energy demand increases, along with the share of renewable energy. This will have an impact on real market prices, which will fall. However, governments will have to pass on an increasing proportion of taxes to consumers.
To see Bruegel’s analysis: https://aeur.eu/f/ade (Original version in French by Pauline Denys)