As Europe Caps Energy Bills, the Merits of Price Controls Get Another Look
The highest inflation in decades and the steep drop in Russian natural gas exports to Europe have pushed a growing number of governments to experiment with ways to control energy prices. The plans will test the economic wisdom that price controls distort markets and create supply shortages.
In the U.K., the new government is planning to cap household energy costs and pay utilities the difference between the cap and market prices, and Germany is working up plans to cap the cost of electricity and natural gas. The European Union has approved both a plan to claw back some energy companies’ profits and redistribute them to consumers, and it is also exploring the creation of a cap on the price of natural gas across the bloc. The U.S. is leading an effort with its allies to cap the global sales price of Russian oil, while a United Nations agency last week called for policy makers to opt for price caps and windfall taxes to fight inflation.
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