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The Costs of Natural Gas Dependency: Price Shocks, Inequality, and Public Policy

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Listed:
  • Mats Kröger
  • Maximilian Longmuir
  • Karsten Neuhoff
  • Franziska Schütze

Abstract

Natural gas prices in Germany saw a strong increase at the end of 2021, subsequently worsening with the start of the war in Ukraine in February 2022, raising concerns about the distributional consequences. Our study shows that low-income households are affected the most by the natural gas price increase. Low-income households pay at the median 11.70 percent of their equivalent income on gas bills, compared to 6.21 percent in 2020. Contrarily, high-income households pay at the median 2.41 percent, compared to 1.52 in 2020. Natural gas expenditures are higher for tenants in detached houses and in houses with no double glassing or thermal insulation. Our policy analysis builds on an exploration of new energy expenditure data in 2020 provided by the German Socio-Economic Panel, and shows that a well-targeted subsidy scheme can be more effective for reducing inequality and less costly than a subsidy for all households. Additionally, the introduction of a minimum energy-efficiency standard for buildings can help reduce inequality in the medium-term.

Suggested Citation

  • Mats Kröger & Maximilian Longmuir & Karsten Neuhoff & Franziska Schütze, 2022. "The Costs of Natural Gas Dependency: Price Shocks, Inequality, and Public Policy," Discussion Papers of DIW Berlin 2010, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2010
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    References listed on IDEAS

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    Cited by:

    1. Sebastian Dullien & Isabella M. Weber, 2022. "Höchste Zeit für einen Gaspreisdeckel: ein wichtiges Instrument im Kampf gegen Energiepreisbelastung [High Time for a Gas Price Cap: An Important Instrument in the Fight Against Energy Price Burden," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(8), pages 595-598, August.

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    More about this item

    Keywords

    Natural gas prices; income distribution; energy efficiency; building retrofit;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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