OECD calls on governments to end energy subsidies

The organization criticizes the cap on gas and the cut in energy VAT and asks for help targeting the vulnerable

Another blow to the OECD’s wrist on policies governments are adopting to protect households and businesses from skyrocketing energy prices. In a report published Wednesday, the organization of the world’s most developed countries acknowledges that measures such as the reduction of energy taxes or the petrol subsidy applied in some countries such as Spain have been successful in their aim.

However, he warns that maintaining them could pose a serious budgetary problem, in addition to being considered unfair from a social point of view, as their benefits “accumulate disproportionately among large energy consumers, who often have high incomes”.

Under this premise, the OECD calls on states to “phase out” such measures, as they also encourage and subsidize the use of fossil fuels. The body also dislikes the cap on energy prices that some countries, such as Spain, have come to apply to contracts in the regulated market.

The so-called Iberian exception has ensured that the prices of the gas bill have not increased further. But the OECD notes that even if the governments that implement it “compensate those who supply for their losses”, the limits could ultimately “discourage infrastructure investment and increase the supply shortage”.

In short, the organization recognizes that governments’ fiscal policies can provide temporary relief, but these costs can be very high if extended over time, even through inflation, by preventing demand from adjusting to the deficit. to offer.

According to the organization’s calculations, the cost of fiscal measures in all OECD countries between October 2021 and the end of 2022 will total $246,000 million.

Source: La Verdad

Wayne

I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.