Now they realize that they have made the wrong energy policy. Let’s save the Italians with a little energy Supply Side Economics

For months we have been warning you on about the flare-up in energy prices, about the danger of the "Green" policy, made at a time when international energy prices are skyrocketing to the point of limiting supplies, even in a cunning way . To quote a random article on the subject, here's this one

Energy prices are exploding in Italy as well as in California. You will pay dearly for the "Green"

Now one of our readers is sending us the increase in gas prices that her gas company will apply to her

This is the volume of increases in natural gas prices that Italian households will face, with increases in the order of 90% over previous prices. This means that if before a family spent 200 euros a month on natural gas, this year risks being faced with much higher figures, from 300 to 400 euros per month. In the face of falling household incomes, will there be the resources needed to cope with this price increase? Furthermore, there will be a devastating secondary effect that will affect the whole economy: the extra money that will be spent on gas (and electricity…) will have to be saved from other costs, primarily discretionary consumption. Fewer restaurants, fewer cinemas, fewer trips, practically a beautiful externally induced economic crisis.

We have talked about the causes and we will talk about them later, even if the feeling that Gazprom wanted to take advantage of the superficiality of Brussels with the Green Deal is very strong. We will talk about medium-long term solutions later on several times: there are technologies, even if those who talk about nuclear power have no idea of ​​the times, especially in Italy. What to do now: the only solution is a quick return to the past, to the "Supply side economics". This means cutting the tax burden and indirect costs that weigh on the energy service to ensure that its cost, in the short term, does not sink the entire economy.

Let's take some practical examples and see a 2021 gas bill:

Just over a third was the cost of energy up to the first quarter of 2021. This component has more than doubled. At this point, to avoid that everything is transferred immediately with prices, putting Italians in their underwear, it is necessary to do "Supply side economics", that is to cut indirect costs and taxation, at least temporarily:

  • freezing the VAT or reducing the VAT rate, to avoid that the increase in VAT is added to the increase in prices;
  • reducing other green excise duties, including any carbon tax;
  • temporarily reduce the costs of transport and management of meters to the bone

It is a question of overcoming the winter, therefore a measure that can last until April 2022. In the meantime, a serious government would seek alternative sources of supply or reactivate national reserves, and then join up with any, if any, medium-term green policies . The alternative is a very hard stagflationary economic crisis, which will hit above all the poorest and fixed incomes.

At this moment there is no other solution and everything will depend on the social sensitivity of the government. This is the real problem because, beyond words, the bubble of well-being that surrounds bureaucrats and politicians is, unfortunately, too thick to be able to make them understand the distress of citizens.

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The article Now they realize they have made the wrong energy policy. Let's save the Italians with a bit of Energy Supply Side Economics comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Tue, 14 Sep 2021 16:37:58 +0000.