The EU needs to invest its way out of the energy crisis

(EurActiv, 9 Dec 2022) European governments’ spending to protect households and businesses from high fossil fuel prices increases Europe’s dependence on them. The European Union can step in with loans to support a major energy transition investment programme, writes William Todts.

William Todts is the executive director of the European Federation for Transport and Environment (T&E). 

EU governments have spent €674 billion to date shielding households and businesses from high oil, gas and other fossil fuel costs. This unprecedented intervention keeps citizens warm but also keeps them hooked on the very fossil fuels that caused the energy crisis. 

Adding fuel to the fire

In a market economy, high prices (real or engineered, as OPEC recently demonstrated) are an expression of scarcity. The only way to structurally lower prices is to alter the demand-supply balance. In that context, spending €674 billion to support demand actually makes the problem bigger. 

For example, Europe’s €35 billion fuel tax cut did very little to ease pain at the pump. Instead, it helped oil producers such as Russia make more money. Some countries, such as Germany, have learned this lesson and ended fuel duty cuts[1]. 

It gets worse once you imagine what we could do with €35 billion. According to calculations by our friends at the Clean Cities campaign in May 2022, just €16 billion would pay for VAT on 200 million bikes; 300 million free public transport passes, or thousands of shared electric vehicles.

External link

EurActiv, 9 Dec 2022: The EU needs to invest its way out of the energy crisis