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The Political Consequences of Energy Price Shocks: Evidence from Germany

Author

Listed:
  • Théo Konc
  • Jan Christoph Steckel
  • Jacob Edenhofer
  • Jens Ewald
  • Thomas Sterner

Abstract

We study the political consequences of Germany's 2022–2023 electricity price increases using four waves of original panel data. Identification exploits the German billing system, under which suppliers raise monthly instalment payments at dates plausibly exogenous to household characteristics. In a staggered difference-in-differences design with later-treated households as controls, those facing an above-median increase become 7.5 percentage points more likely to support the far-right Alternative für Deutschland (AfD). The shift persists, and attitudes, including support for climate policy, adjust only afterwards. This response emerges even though no climate policy caused the shock, households could not anticipate it, parties at both political extremes opposed the underlying sanctions, and compensation was generous. We interpret our reduced-form results in a spatial voting framework in which the loss raises the value of a party's promise of lower future energy costs. Our results imply that the standard welfare-economic separation of efficiency from distribution can carry a political cost even when compensation is generous and non-distortionary.

Suggested Citation

  • Théo Konc & Jan Christoph Steckel & Jacob Edenhofer & Jens Ewald & Thomas Sterner, 2026. "The Political Consequences of Energy Price Shocks: Evidence from Germany," CESifo Working Paper Series 12887, CESifo.
    • Handle: RePEc:ces:ceswps:_12887
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    References listed on IDEAS

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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