Finance: Research, Policy and Anecdotes

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.

Overview