Broad economic crisis measures like blanket energy subsidies and fuel tax cuts are expensive, poorly targeted, and actively undermine necessary market green transitions, according to a recent policy note from Alm – Center for Economic Policy led by former Socialist Left Party (SV) top politician Kari Elisabeth Kaski. The report argues that future crisis responses should instead rely on direct, targeted financial assistance to vulnerable households while preserving critical market price signals.
The Hidden Costs of Blanket Crisis Intervention
Governments across Europe have spent hundreds of billions of crowns over recent years deploying broad measures such as general electricity subsidies and temporary fuel duty reductions to cushion consumers against surging energy costs. According to Alm’s policy note authored by adviser Thomas Røkås, titled “Krisepolitikk for negative tilbudsidesjokk,” these broad instruments are politically attractive because they deliver immediate relief. However, they frequently fail to reach those who need support the most while imposing massive fiscal burdens.
“There have been several problematic aspects of the crisis measures,” Kaski told E24, noting that past policies weakened market price signals and discouraged structural adjustments that would have left societies less vulnerable to subsequent shocks. Data from the Ministry of Finance indicates that state revenues from the power sector reached 39,6 milliarder crowns in 2022, climbing to 91,8 milliarder kroner i 2023, before settling at 51,7 milliarder i 2024 and 32,6 milliarder i 2025. Despite these substantial public revenues, Alm calculates that properly targeted interventions during the pandemic and recent energy crises could have cost merely 25 to 40 percent of what was ultimately spent.
Lessons From International Energy Models
Alm’s research evaluates the performance of various energy crisis interventions deployed across Spain, Portugal, France, Germany, Poland, Hellas, and Norway. The findings suggest that policymakers must design interventions that maintain consumer awareness of resource scarcity rather than masking market realities entirely.
As a workable model, Kaski highlights Germany’s approach of subsidizing roughly 80 percent of household electricity consumption based on historical usage. “That encourages people to continue investing in energy saving,” Kaski explained. Conversely, the Alm note points to negative examples, such as Spain’s tax cuts which inadvertently boosted gas consumption by 20 percent, alongside Norway’s fuel duty cuts in 2026 that similarly dull necessary behavioral adjustments.
Pro Tip for Policymakers: Alm recommends building robust data infrastructures ahead of time so authorities can administer direct income support or housing benefit enhancements rapidly when unexpected shocks strike, avoiding the need for clumsy blanket rollouts.
Targeted Alternatives and a Proposed Green Interest Rate
To avoid the pitfalls of broad subsidies, Alm advocates for a structured toolbox that relies on automatic economic stabilizers and deliberate advance planning. The think tank suggests taking several extra weeks to properly vet crisis packages rather than rushing out unrefined legislation.
Furthermore, Alm suggests exploring a distinct green monetary policy. According to Kaski, standard interest rate hikes designed to curb general inflation risk crowding out crucial green and critical societal investments during supply-side crises. While central banks like Den europeiske sentralbanken (ESB) have faced similar discussions, Kaski argues that Norway should evaluate whether to shelter critical long-term transitions from routine monetary tightening.
Frequently Asked Questions
What is Alm – Center for Economic Policy?
Alm is an independent economic policy think tank led by former SV politician Kari Elisabeth Kaski. It receives funding from philanthropic organizations including Fritt Ord, Finansmarkedsfondet, KR Foundation, and Swiss philantrophy, though Kaski maintains that funders exert zero influence over the center’s analytical conclusions.
Why does Alm criticize broad electricity subsidies?
According to Alm’s policy note, broad schemes are expensive, fail to target the most vulnerable citizens effectively, and destroy price signals that encourage long-term energy efficiency and economic restructuring.
What alternative does Alm propose for future crises?
Alm advises using direct, targeted income support or housing allowance adjustments tailored to household income, energy vulnerability, and geography, alongside infrastructure subsidies like cheaper public transit and home solar installations.
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