Compensating households for high energy prices. Examining six measures

Energy prices have risen sharply since the end of 2021. The war in Ukraine is putting further pressure on the gas market, resulting in even further increases in energy prices. The central government is taking various measures to compensate for the rising energy prices, including a reduction in energy tax, a one-time energy surcharge and a temporary VAT reduction on energy. These measures are not structural in nature: it is not yet known if and what measures the central government plans to use from 2023 to compensate households for high energy prices.

Eneco, an energy supplier, believes it is important for household energy use to become more sustainable while remaining affordable. Eneco is therefore looking for ways in which the central government can compensate households for increased energy costs, without reducing the incentive to become more sustainable.

In this paper, we examine six possible compensation measures. We compare these measures on the basis of various criteria:

  • target group: will those households that will benefit the most be compensated?;
  • feasibility for the energy suppliers, municipalities and the tax authorities;
  • impact on income groups;
  • impact on public finances;
  • impact on energy saving: does the measure create an incentive to improve sustainability (energy-saving behaviour and conservation measures)?