Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271807 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10163
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
To help German households and firms with exploding energy costs, the German government is about to implement a new transfer scheme called "gas price brake." A unique feature of this energy price relief measure is that both households and the industry receive a transfer that increases in one's actual gas price. In a formal model, we show that such a transfer scheme creates incentives for moral hazard of gas providers to raise gas prices. We also show that competition does not help to overcome this adverse effect of the gas price brake. An equivalent critique applies to the electricity price brake that is to be implemented at the same time as the gas price brake.
Subjects: 
energy prices
energy policy
consumer protection policy
gas price brake
JEL: 
D04
L12
Q48
K33
Document Type: 
Working Paper
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