Use Germany’s High Gas Prices to Cut Consumption
The German government should make use of high gas prices to get consumers to use less of this raw material. This is the recommendation of the ifo Institute. “Energy consumption won’t fall far enough unless higher prices are passed on to consumers. What’s needed is a raft of targeted support measures to ensure that nobody is burdened beyond their means,” writes ifo researcher Karen Pittel in an article for ifo Schnelldienst.
Cooperation and solidarity are also needed within the EU to minimize the impact on all member states. “With quick, decisive action by policymakers, the consequences of Russia’s supply freeze will be painful but manageable,” Pittel says.
She adds that the crisis poses challenges for public budgets and the only way to avoid overstretching them is if policymakers focus their spending and limit tax shortfalls. In Pittel’s opinion, the German government’s third relief package is still too broadly based, offers too little in the way of incentives to save energy, and urgently needs to be supplemented, especially as regards dealing with the gas crisis. When applying new instruments such as an excess profits tax, careful consideration should be given to the short-term benefits and long-term costs.
