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Soaring Electricity Prices: Is Cutting the Cable a Good Idea?

Author

Listed:
  • Christoph Böhringer
  • Bengt Kriström

Abstract

In light of sharply rising international electricity prices, Sweden as a major electricity-exporting country has considered export restrictions to protect its domestic electricity- and export-intensive industries. We employ a computable general equilibrium model calibrated to Swedish data to quantify the economy-wide impacts of export restrictions. We find that while export restrictions may protect domestic electricity- and export-intensive industries, they lead to substantial foregone export revenues and overall welfare losses. Targeted subsidies to employment or output in these industries, on the other hand, can achieve identical protective effects as export restrictions while preserving most of the gains from trade. The analysis also highlights the distributional consequences of electricity price increases, underscoring the need for policymakers to consider potential equity implications.

Suggested Citation

  • Christoph Böhringer & Bengt Kriström, 2026. "Soaring Electricity Prices: Is Cutting the Cable a Good Idea?," CESifo Working Paper Series 12765, CESifo.
    • Handle: RePEc:ces:ceswps:_12765
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    References listed on IDEAS

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    5. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
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    Keywords

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    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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