Project SyndicateProject Syndicate

Righting Europe’s energy wrongs

By Daniel Gros

05 Jan 2023 · 3 min read

Editor's Note

A columnist writing for Project Syndicate argues government efforts to shield households and businesses from higher energy costs are self defeating, resulting in much larger indirect economic costs.

BRUSSELS – Europeans are finally getting a breather from sky-high gas prices. Thanks to declining demand by industry and households – driven by energy-saving efforts and a milder-than-usual winter – coupled with increased alternative sources, like wind and nuclear, gas prices have dropped to levels not seen since before Russia invaded Ukraine last February. But prices might rise again – and governments should let them.

Across the European Union, electricity generation and gas are inextricably linked. Gas is the most flexible fuel for thermal power stations, making it indispensable during peak hours. But it is not particularly efficient. In fact, gas requires at least two megawatt hours of calorific content to produce one MWh of electricity.

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