Andy Mayer, IEA Energy, Environment and Infrastructure Analyst, has commented for City AM on the damaging effects of government intervention in energy markets and reports that a further price cap may be introduced to tackle rising energy prices.

He argues that spikes in energy prices are “rooted in the government’s interventions in the energy market”.

“More intervention is not a solution and will make these problems worse. This policy is a mask, when what the market needs is a vaccine.”

“Addressing neither error, while introducing a hidden price cap, will further damage competition and ensure that taxpayers are exposed to higher costs for longer. The main winners will be financiers supporting wholesale hedging contracts, not the public.”

Julian Jessop, IEA Economics Fellow, also commented on the proposed measure.

 “market incentives can only work properly if risks are shared by consumers and suppliers”

“The proposed mechanism is described as ‘temporary’ and ‘self-funding’, but it cannot really be both. For the taxpayer to get their money back, the scheme would need to be in place for a long time. And during this time, suppliers would have to pass any savings from lower wholesale costs to the taxpayer rather than to customers.”

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