Over the last few months, the rapid rise in energy prices, particularly for gas and electricity, has brought the issue of energy costs to the forefront of the political and media scene, putting significant pressure on policymakers to find appropriate responses to this "crisis". This renewed attention has also brought its share of confusion and controversy on the subject, particularly with regard to the magnitude of price changes and the weight of different factors in explaining this increase, considering also the interactions between wholesale and retail markets, and the different impacts on countries according to the specific characteristics of their energy mix and the functioning of energy markets. This Note aims to synthesise and put these developments into perspective, linking them to the urgent need to accelerate the transition to low-carbon economies.
The main political debate at this stage is about policy responses to this energy price "crisis". There is an urgent need to distinguish between very short-term palliative measures (limiting the impacts on the most vulnerable actors) and longer-term measures (accelerating the low-carbon transition to reduce vulnerability to future price shocks). Similarly, it is important to bear in mind that this crisis is producing both winners and losers, opening up the possibility of implementing new redistributive mechanisms, in order to finance compensation measures for the most vulnerable through the direct participation of those actors benefiting from windfall profits.