LESSONS FROM 2021 TO 2023 Inflation management calls for a sustainable energy transition in Europe

The briefing analyzes the relationship between gas dependency, electricity prices, and inflation in the EU from 2021 to 2023. It finds that gas-based marginal pricing drives electricity costs and energy inflation, while renewable energy and energy efficiency can lower and stabilize these prices. The authors contend that the ECB's current broad interest rate hikes hinder the capital-intensive investments needed for this transition, potentially undermining the bank's own price stability mandate. They recommend targeted monetary policy to support the energy transition.

• Gas-based power generation frequently determines electricity prices in the EU due to the merit-order system, with gas setting prices 55% of the time in 2022 despite providing only 19% of total electricity.
• Increasing renewable energy capacity and improving energy efficiency are the two primary methods to reduce the gap between renewable production and electricity demand, thereby lowering the reliance on gas.
• There is a direct correlation between electricity prices and energy inflation (HICP energy); specifically, when electricity prices exceed 150€/MWh, HICP energy typically rises between 20% and 45% year-on-year.
• The EU's increasing reliance on Liquefied Natural Gas (LNG) increases vulnerability to global price shocks and volatility because LNG is generally more expensive than pipeline gas and is traded heavily on spot markets.
• Exceptional public energy subsidies in the EU, totaling 216 billion euros in 2021 and 390 billion in 2022, mitigated the impact of gas and electricity prices on overall inflation.
• Current ECB interest rate policies act as a barrier to the energy transition; for example, a 3% rate increase is estimated to add €3.5 billion in annual costs for renewable deployment in the Netherlands by 2030.

APA

Schreiber, P., Her, H., & Brown, S. (2023). LESSONS FROM 2021 TO 2023 Inflation management calls for a sustainable energy transition in Europe. Reclaim Finance. https://reclaimfinance.org/site/wp-content/uploads/2023/12/12122023_RF_Briefing_Inflation_energy_EU.pdf

Chicago

Schreiber, Paul, Henri Her, and Sarah Brown. LESSONS FROM 2021 TO 2023 Inflation management calls for a sustainable energy transition in Europe. Reclaim Finance, 2023. https://reclaimfinance.org/site/wp-content/uploads/2023/12/12122023_RF_Briefing_Inflation_energy_EU.pdf.

Wikipedia

{{cite report |last1=Schreiber |first1=Paul |last2=Her |first2=Henri |last3=Brown |first3=Sarah |title=LESSONS FROM 2021 TO 2023 Inflation management calls for a sustainable energy transition in Europe |publisher=Reclaim Finance |date=December 2023 |url=https://reclaimfinance.org/site/wp-content/uploads/2023/12/12122023_RF_Briefing_Inflation_energy_EU.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{schreiber2023lessons, author = {Schreiber, Paul and Her, Henri and Brown, Sarah}, title = {{LESSONS FROM 2021 TO 2023 Inflation management calls for a sustainable energy transition in Europe}}, institution = {Reclaim Finance}, year = {2023}, month = dec, url = {https://reclaimfinance.org/site/wp-content/uploads/2023/12/12122023_RF_Briefing_Inflation_energy_EU.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }