Esade EcPol calls for avoiding energy price controls to achieve decarbonization goals

MADRID, 2 Jun. (EUROPA PRESS) -

The Center for Economic Policies and Political Economy of Esade (Esade EcPol) considers that price controls and subsidies in the field of energy are an obstacle to achieving the goals of decarbonising the economy, according to a report published this Wednesday.

The Center considers that the new European objective of energy independence from Russia must be aligned with that of decarbonisation. Although in the medium and long term, this "seems obvious" in the short term it poses challenges for the Twenty-seven due to the pressure of inflation, the costs of transition and that the mechanisms that must guarantee that both objectives are aligned are not sufficiently articulated.

In this context, Esade EcPol considers it essential to maintain the "price signal" by avoiding the use of price controls and subsidies. In the opinion of the 'think tank', although it can be argued that curbing inflation has a greater public interest" at the moment, "it is not clear that for this benefit the damage inflicted on decarbonization is worth the rock."

Thus, the Center has also considered the Government's suggestions to extend the term of the fuel subsidy "worrying" because it can create a "precedent" on the priority of the objectives of decarbonising the economy.

On the other hand, the body has positively assessed, at least in theory, the proposal by Spain and Portugal to cap the price of gas because, although this source of energy is only 10% of total production, the current marginalist system implies that there is an "almost perfect" correlation between the price of gas and electricity.

"This design should not affect the appropriate incentives if, in the end, the price paid continues to be above the costs of the rest of the technologies, ensuring a minimum return for these while gas generators are not allowed to fall into losing territory", he underlined. Esade EcPol.

Another alternative that the Center is considering to align energy independence and decarbonization is to use the benefits that have fallen from the sky to finance transfers to the affected population. This also means maintaining the "price signal".

This is important because Esade anticipates that the costs of decarbonization "will be borne by greater interest from the lowest incomes." Both directly, because energy is a higher percentage of household expenses, and indirectly, because they suffer more intensely from the price escalation that penetrates the rest of the goods and services.