The author believes that if all EU countries gradually lower energy taxes or if energy subsidies are sufficient, the demand for energy will increase.
(Photo: dpa)
Many countries in the EU are currently launching national programs to cushion the sharp rise in energy prices for companies and private households. Many of these programs are problematic simply because they are too broad.
Above all, however, there is a risk of a real subsidy race within the EU. This can lead to distortions of competition in the internal market, and overall the national measures could also neutralize each other with a view to reducing energy costs.
If all EU countries gradually reduce energy taxes or energy subsidies are sufficient, the demand for energy will increase, which will continue to drive up net energy prices with short-term inflexible supply. As a result, in this case, state aid does not benefit the energy consumers, but the suppliers.
This effect is negligible for individual and especially smaller countries, but not for the European economic area as a whole. Since there is little incentive for individual countries to work for the big picture, the EU Commission is called upon here: Competition policy should quickly stop the subsidy race, especially for energy-intensive industries, because the distortion of competition caused by subsidies is particularly pronounced there.
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Only if higher energy prices affect companies in a similar way will competition remain intact and the rise in energy costs can be passed on in line with the market. Aid for private households should also remain strictly limited to those who would otherwise reach the limits of their economic capacity. This is the only way that the increased uncertainty in the energy supply can be properly balanced out via the price system.
The author is Vice President and Head of Economic Affairs at the Kiel Institute for the World Economy.
(Photo: imago images/Metodi Popow)
The EU showed itself to be very united when it came to the decision on sanctions against Russia. This unity is now also important when responding to the economic consequences of the sanctions.
This requires a coordinated approach at EU level. Otherwise, going it alone will damage competition in the internal market and at the same time thwart the desired goal.
More: Economic models – energy is neglected as a production factor.