In the current energy crisis, however, the response of the French and UK governments could not have been more different. Globalist President Emmanuel Macron’s government has favored a populist strategy, while Boris Johnson has called for the IMF-recommended economic manual. Both countries face the same shock – that of wholesale gas prices being around 10 times the normal level. France is supported by a large nuclear sector, which normally provides 70 percent of its electricity generation, but much less at the moment with half of its reactors shut down. The UK has the advantage of natural gas reserves in the North Sea, which provided around 40 per cent of consumption last year. Overall, UK net gas imports are similar to France. In Paris, the response to the energy crisis was a concerted effort to find a big carpet on the Elysee Palace and solve all the problems under it. The Macron government’s so-called “tariff shield” policy has limited electricity price increases to 4 percent this year and frozen domestic gas prices. Consumer protection requires public finances to bear the cost of wholesale price increases. In Downing Street, by contrast, the UK government has so far adopted the broad choice to expose the problem and deal with it transparently. Increases in wholesale energy costs are passed on to consumers, albeit with a delay, suppliers are not spared and every household has been given a huge incentive to save energy. To help households, the government has put in place a £37 billion package of targeted support for the elderly and the poorest with one-off payments for everyone to help pay for higher energy costs. Fittingly, a small part of this package has been funded by a windfall tax on companies making windfall profits from North Sea operations. While the UK’s package is complicated, messy and leads to much higher inflation, it is very close to the IMF’s recommendation that countries should allow prices to rise and compensate vulnerable energy users for their losses. Overall, this is cheaper than a blanket tariff cap, as well as being transparent and providing the right incentives. The problem is that while economists tend to love the UK solution, the public hates it. The government has received almost no credit for the support it has offered so far, and the national debate has focused on raising bills rather than getting help on its way. The truth is that both countries now have to learn from each other. Retail energy prices have already risen so far in the UK that households no longer need additional reasons to reduce their use — the energy savings will happen anyway. Targeting households for income support also has its limits, because it provides too much help for those in small energy-efficient homes and too little for those in old, dry homes (often through no fault of their own). Some kind of French press is now needed with public funding discount for bills, temporary but important. In France, however, public finances are overexposed to wholesale energy prices. Too much of the burden is placed on future generations rather than on today’s consumers, who face little additional pressure to reduce their gas and electricity use. Retail prices should be further increased with additional support offered to vulnerable people. Both governments will find it difficult to budge from their current positions to provide energy support. As difficult as it may be for Macron and the next UK prime minister to look across the water and learn lessons, the solution to their energy woes lies partly on the other side of the Channel. [email protected]
title: “For Solutions To The Energy Crisis Look Across The Channel Klmat” ShowToc: true date: “2022-11-25” author: “Robert Burdick”
In the current energy crisis, however, the response of the French and UK governments could not have been more different. Globalist President Emmanuel Macron’s government has favored a populist strategy, while Boris Johnson has called for the IMF-recommended economic manual. Both countries face the same shock – that of wholesale gas prices being around 10 times the normal level. France is supported by a large nuclear sector, which normally provides 70 percent of its electricity generation, but much less at the moment with half of its reactors shut down. The UK has the advantage of natural gas reserves in the North Sea, which provided around 40 per cent of consumption last year. Overall, UK net gas imports are similar to France. In Paris, the response to the energy crisis was a concerted effort to find a big carpet on the Elysee Palace and solve all the problems under it. The Macron government’s so-called “tariff shield” policy has limited electricity price increases to 4 percent this year and frozen domestic gas prices. Consumer protection requires public finances to bear the cost of wholesale price increases. In Downing Street, by contrast, the UK government has so far adopted the broad choice to expose the problem and deal with it transparently. Increases in wholesale energy costs are passed on to consumers, albeit with a delay, suppliers are not spared and every household has been given a huge incentive to save energy. To help households, the government has put in place a £37 billion package of targeted support for the elderly and the poorest with one-off payments for everyone to help pay for higher energy costs. Fittingly, a small part of this package has been funded by a windfall tax on companies making windfall profits from North Sea operations. While the UK’s package is complicated, messy and leads to much higher inflation, it is very close to the IMF’s recommendation that countries should allow prices to rise and compensate vulnerable energy users for their losses. Overall, this is cheaper than a blanket tariff cap, as well as being transparent and providing the right incentives. The problem is that while economists tend to love the UK solution, the public hates it. The government has received almost no credit for the support it has offered so far, and the national debate has focused on raising bills rather than getting help on its way. The truth is that both countries now have to learn from each other. Retail energy prices have already risen so far in the UK that households no longer need additional reasons to reduce their use — the energy savings will happen anyway. Targeting households for income support also has its limits, because it provides too much help for those in small energy-efficient homes and too little for those in old, dry homes (often through no fault of their own). Some kind of French press is now needed with public funding discount for bills, temporary but important. In France, however, public finances are overexposed to wholesale energy prices. Too much of the burden is placed on future generations rather than on today’s consumers, who face little additional pressure to reduce their gas and electricity use. Retail prices should be further increased with additional support offered to vulnerable people. Both governments will find it difficult to budge from their current positions to provide energy support. As difficult as it may be for Macron and the next UK prime minister to look across the water and learn lessons, the solution to their energy woes lies partly on the other side of the Channel. [email protected]
