IMF urges Europe to Shift Energy Costs to Wealthier Consumers

The IMF has called on European governments to pass on rising energy costs to wealthier consumers to encourage "energy conservation" and a switch to greener energy, the Financial Times reports.

Governments across Europe have tried to protect households from skyrocketing costs with broad price controls, tax cuts and subsidies.

Oya Celasun, assistant director in the IMF's European department, said in a blog post on Wednesday that governments "must allow the full increase in fuel costs to be passed on to end-users to encourage energy savings and the shift to fossil fuels."

"Introducing relief measures to support low-income households, which have the least means to cope with skyrocketing energy prices, should be a priority", Celasun said.

"Policies should shift from existing broad-based support measures to targeted relief," the IMF representative added.

"Existing broad support measures are not only delaying the necessary adjustment to the energy shock, they are keeping global energy demand and prices higher than they would otherwise be", the IMF also warned.

In many countries, spending to combat rising energy prices will exceed 1.5 percent of economic output this year due to wide-ranging price suppression measures, the fund also predicted. Fully offsetting the cost of living increase for the poorest 20 percent of households would cost governments an average of 0.4 percent of gross domestic product in 2022, while offsetting the poorest 40 percent of households would cost 0.9 percent of GDP.

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