A new study released by Econpol Europe, announced Monday by the Ifo Institute, suggests that governmental relief measures implemented during energy crises primarily strengthen fossil fuels, which is ultimately detrimental to climate goals.
The report indicates that the assistance packages-which include tax cuts, price caps, or direct payments-have resulted in an average sustained subsidy across the EU-27 during the crisis years of 2022 and 2023. This subsidy amounts to approximately 18 euros per ton of CO2 for natural gas and 10 euros per ton of oil.
Andreas Peichl, an Ifo researcher, noted that Germany alone provided up to 187 billion euros during the energy crisis triggered by the war in Ukraine, with about 71 billion euros specifically dedicated to targeted aid for oil and gas customers.
Matthias Kalkuhl of the Potsdam Institute for Climate Impact Research argues that when states reduce taxes on gasoline, diesel, or gas, they primarily alleviate the burdens on households and companies with high consumption. Simultaneously, these measures dampen the price shocks that are intended to encourage conservation. The researchers emphasize that future relief efforts should incentivise energy saving; furthermore, they suggest that these measures must be refinanced through higher charges on fossil fuels. They point to measures like lower electricity taxes as a more environmentally sound alternative, as these make electricity cheaper relative to oil and gas, helping many households without directly subsidizing fossil fuel consumption.
The study also highlights Europe’s significant reliance on fossil fuel imports. On average, the EU covers about 57 percent of its energy needs through imports. In 2023, Germany imported fossil energy worth around 80 billion euros, covering 67 percent of its domestic consumption. If global market prices were to rise permanently by 50 percent, Germany alone would face an increase in import costs of about 40 billion euros annually, equating to roughly one percent of the nation’s economic output.
Ulrich Eydam from the University of Potsdam warns that these continuous subsidy effects, which are calculated by the study across different countries in euros per ton of CO2, lead people to expect continued state intervention whenever oil prices rise. He concludes that these programs amount to an insurance policy financed by taxpayers that ultimately hinders the transition to domestic, electricity-based energy technologies.
The calculation is based on detailed data regarding energy imports, prices, and government assistance programs across Europe. For Germany, the researchers used specific data on the “relief packages” from 2022 through 2024, while for the European level, they utilized harmonised data from the Bruegel Institute on national relief measures alongside Eurostat data on energy imports, economic output, and trade.
