Europe Spends €800 Billion to Fight Off Energy Crisis, Germany Top Spender

Supply pipes at the Ruhr Oel petroleum refineries of BP Gelsenkirchen GmbH in Gelsenkirchen, Germany, on Mar. 8, 2022. (Ina Fassbender/AFP via Getty Images)

Europe has spent close to €800 billion in the past 17 months to combat its energy crisis, with Germany spending the most money to protect households and businesses from energy inflation.

“Since the start of the energy crisis in September 2021, €792 billion ($846.6 billion) has been allocated and earmarked across European countries to shield consumers from the rising energy costs … The current increase in wholesale energy prices in Europe has prompted governments to put in place measures to shield consumers from the direct impact of rising prices,” a Feb. 13th analysis by Belgium-based economic think-tank Bruegel states.

Out of the €792 billion, €681 billion was accounted for by the European Union, €103 billion by the United Kingdom, and €8.1 billion by Norway.

Germany made the highest allocation in the list, setting aside €268.1 billion to shield its energy consumers. The United Kingdom came in second, followed by Italy with €99.3 billion, France with €92.1 billion, and Spain with €40.2 billion.

A Dec. 19th analysis by the Institute for Energy Research (IER) pinned the blame of Europe’s current energy crisis on bad decisions made by the bloc, such as its promotion of renewable energy at the cost of clamping down on its oil and gas production.

Spending on Combating Energy Crisis

In terms of percentage of GDP, Slovakia earmarked the most funds for its energy consumers, at 9.3 percent, according to the Bruegel analysis. This was followed by Germany at 7.5 percent, Malta at 7.1 percent, Denmark at 6.1 percent, and Bulgaria at 5.7 percent. Cyprus and Finland set aside less than 1 percent of their GDP for this purpose.

European Union nations were found to have imposed a slew of measures to combat energy inflation, including reducing energy tax/value-added tax (VAT), regulating retail prices, fund transfers to vulnerable groups, support to businesses, and so on.

“This time we also split measures on targeted Vs un-targeted. Result is that governments favored un-targeted price-distorting measures, e.g., cuts to excise duties and VAT, compared to measures directly supporting households and firms. This needs to change as we move forward,” Simone Tagliapietra, one of the authors of the report, stated in a tweet on Feb. 13.

Excluding Germany, €217 million were set aside for untargeted price regulation measures, with only €33.57 million set aside for targeted price measures.

The €792 billion measure to counter the energy crisis brings it into the same league as the EU’s COVID-19 recovery fund that had amounted to €750 billion.

Germany has faced criticism for the large size of its energy aid package as some have expressed worries about Berlin’s policies derailing energy control measures in Europe as a whole.

“Europe is fighting the energy war together; ensuring unity is maintained is of paramount importance to defeat Putin’s energy blackmail. Germany appears to be flexing its fiscal muscles to subsidize gas consumption in Germany, driving up prices and hurting its neighbors,” Bruegel said in a blog post on Sept. 30.

A Homemade Crisis

In 2021, following the COVID-19 lockdown, energy demand in Europe “came back with a vengeance,” the Dec. 19th IER analysis states.

However, Europe had taken a slew of measures that negatively affected its energy output, including banning hydraulic fracking, shuttering coal and nuclear plants, and cutting leases for oil and gas production, all the while pushing the transition to renewable energy.

Due to these policies, Europe did not have the energy supply to meet its demand, IER claims. As a result, the region was forced to deplete its energy reserves, with the Russia–Ukraine conflict adding to its woes.

“Now, Europe is faced with energy shortages, skyrocketing energy prices, and major uncertainty regarding its energy and economic future. Yet, it has not given up on its energy transition to renewable energy (wind and solar power) despite their weather dependency and lack of firm power capability,” the analysis stated.

In January, Anders Opedal, CEO of Equinor, one of Europe’s biggest gas companies, warned that energy prices are likely to remain high as governments attempt to push windfall taxes on energy firms and meet its “net zero” targets. These efforts are expected to make it hard for energy prices to decline.