2022 Exams - UK Energy Price Crisis: Policy Responses

What government interventions might limit the impact of the surge in energy prices?

Short term interventions:

1. Cut or freeze VAT on gas bills
2. Freeze the contribution to gas bills from the climate change levy
3. Increase in winter cold weather payments to poorer households (Warm Homes rebate is paid to families on a means-tested basis)
4. Temporary state-backed loans to energy companies to help absorb higher costs – which would be paid back when prices are lower
5. Preferred government policy - £200 energy bill rebate loans for customers – to be repaid in annual instalments of £40 for 5 years

Longer term strategies:

1. Investment to improve energy efficiency in homes - more than 16m UK homes are 'not energy efficient’ with limited insulation
2. Accelerate shift to renewable energy supplies to reduce gas dependence
3. Investment in much higher gas storage capacity so that UK market is less impacted by short term global price volatility
4. Shift towards installing electric heat pumps in houses