High Oil Prices May Slow Shift To Alternative Fuels
The runup in oil prices could have the counterintuitive effect of slowing the shift to alternative fuels in Europe, at least in the short term, according to Oxford Analytica.
Recent rises in energy prices could prove economically and environmentally beneficial in the longer term — by providing incentives to consumers and producers to adapt their behaviour and invest in alternative sources, OxAn says in the report High fuel cost threatens green targets. However, in the short term they may be politically damaging as they pit consumers and businesses against governments.
Surging energy prices have spurred protests throughout Europe and put pressure on governments to take action to alleviate their effects.
OxAn’s report provides analysis of developments and policy responses in several European countries.
This presents a dilemma for the European Commission and put its plans for using economic instruments (including taxes) for environmental objectives in jeopardy.
It may also be more difficult for the Commission to act on last year’s proposals to apply market-based instruments more extensively since any measure which has the effect of raising energy prices will face considerable opposition.
“In the past, higher energy prices (helped by pro-active government policies) eventually led to adjustments in consumer behaviour and investment patterns. However, the risk of short-term political unpopularity might prevent current governments from maintaining and extending green policies at a time of high energy prices.”
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