Public aid has halved soaring energy prices for the French

This is a timely study. At a time when the executive thinks about the possible evolution of its tariff shield on gas and electricity prices, INSEE assessed its impact on households and businesses. The system, deployed since autumn 2021 to compensate for the surge in energy prices triggered by the post-Covid recovery and then aggravated by the war in Ukraine, is based on two measures: the gas price freeze at its October 2021 level and capping electricity price increases at 4%. Last April, a discount at the pump of 18 cents per liter of fuel was added.

20% increase for businesses

Without this aid, the bill would have been much more painful, with adverse effects on the economy and the social climate. The French would have suffered an increase in their energy bill (electricity, gas and petroleum products) twice as high. According to INSEE calculations, it would have reached 54% between the second quarters of 2021 and 2022, when in fact it was limited to 28%.

The protective effects on businesses are also very clear. Their energy bill has gone up by 20% instead of 50%.

The mechanisms put in place by the State have concealed from households and businesses the real increase in energy prices on the markets. Freezing regulated gas prices at their October 2021 level thus avoided a 47% jump in prices and electricity prices only increased by 4% compared to a 35.4% increase including tax recommended by the sector regulator, the Energy Regulatory Commission (CRE).

Finally, the discount at the pump of 18 centimes per liter introduced later has also contained the surge in fuel prices to 34% over one year instead of 46%.

A significant impact for the most modest

State subsidization of energy tariffs has limited inflation in France, allowing the country to post a rise in consumer prices among the lowest in the euro zone .

“In the absence of energy shield measures, inflation in France between the second quarters of 2021 and 2022 would have reached 8.4% against 5.3% measured”, indicates INSEE. The increase in the prices of gas, electricity and petroleum products alone “contributed to 3.1 points of inflation out of a total of 5.3%, two-thirds reflecting the rise in the price of energy consumed by households for travel and heating,” the institute specifies. The tariff shield absorbed half the shock.

Households with the lowest incomes, for whom energy can represent up to 12.7% of expenditure, were the most affected by the price increases. But it is for them and also for the older ones that the effects of the shield have been the most important. Similarly, the measure benefited farmers, workers and employees more than executives.

“Contained and reasonable increase”

Faced with the very high cost of the device for public finances, the executive has initiated a reflection on the future of the tariff shield on gas and electricity prices. The idea now is to better target aid. For this, it will be necessary to define the level of price increase acceptable to the French.

“Without the tariff shield, the increase in gas and electricity tariffs would be at least 100% next year! That is an increase of 120 euros on average per month and per household. It would be unbearable.” confided this week to the “Echos” the Minister of the Economy, Bruno Le Maire promising a rise in energy prices “contained and reasonable compared to this worst-case scenario”.