Finance: Research, Policy and Anecdotes

Europe’s energy policy in the wake of Russia’s aggressio...

The invasion of Ukraine by Russia has transformed the European energy crisis, which had already started in summer 2021, into a structural one. Several of my colleagues at the Florence School of Regulation have written a manifesto on the best way forward, to address this crisis while working on mitigating the impact of the climate crisis: Between crises and decarbonisation: realigning EU climate and energy policy for the new “State of the World”.  I was privileged to participate in the discussion and sign the manifesto, recently presented in Brussels.

 

The main policy conclusions can be summarised as: don’t give up on the market but use policy interventions to ensure a fair transition for Europe, especially the most vulnerable households. Regulating prices should only be used as last resort; targeted lump-sum transfers should rather be used to support the losers of the crisis and could be financed with a tax on windfall profits by the winners of the crisis. In the medium-term, there is a need for a strong focus on energy security of the EU, including the acceleration of using renewable energy and reduction of fossil fuel use and the build-up of a skilled workforce in the renewable energy sector. Finally, there is the need to build a future-proof energy market, which combines the role of price signals with reduced volatility for consumers. Most importantly, in spite of the many short-term pressures (and thus political temptation for short-term fixes) a clear long-term strategy is needed.