Researchers stated on February 13, 2023, that the bill for European governments to protect businesses from rising energy costs has increased to nearly 800 billion euros, encouraging countries to be more targeted in their expenditures to address the energy problem.
According to an analysis by one of the think tank’s, European Union countries have already designated or committed 681 billion euros in the escalating energy crisis, while Britain has contributed 103 billion euros and Norway has allocated 8.1 billion euros since September 2021.
The 792-billion-euro sum compares to the 706-billion-euro total in think tank’s previous forecast in November, as countries face the consequences of Russia shutting off most of its gas deliveries to Europe in 2022.
Germany led the way in terms of spending, allocating about 270 billion euros—a figure that dwarfed all other countries. Britain, Italy, and France came in second, third, and fourth, with each spending less than 150 billion euros. Most EU member states only spent a small portion of that.
Luxembourg, Denmark, and Germany were the highest spenders per capita.
The countries’ expenditure on the energy crisis is now on par with the EU’s 750 billion-euro COVID-19 recovery fund. To deal with the pandemic, Brussels agreed to take on collective debt and pass it on to the bloc’s 27 member states in 2020.
The report on energy spending comes as nations discuss EU proposals to relax state assistance regulations even more for green technology initiatives as Europe strives to compete with American and Chinese subsidies.
Some EU capitals are concerned that encouraging more state aid may disrupt the bloc’s internal market. Germany has come under fire for its massive energy aid program, which is considerably beyond what other EU countries can pay.
According to the think tank, governments have focused the majority of their support on non-targeted measures to reduce the retail price consumers pay for energy, such as VAT reductions on petrol or retail power price ceilings.
The think tank stated that this dynamic needed to shift since states are running out of financial flexibility to continue providing such extensive assistance.
According to research analyst Giovanni Sgaravatti, governments should now promote more income-supporting policies aimed at the bottom two quintiles of the income distribution, especially towards important sectors of the economy, rather than price-suppressing measures that are, in effect, fossil fuel subsidies.