HOW EUROPE’S MANUFACTURING SECTOR COPES WITH ENERGY PRICE SHOCKS

The invited policy session of the 77th Economic Policy panel meeting featured Philippe Martin of Sciences Po and CEPR and Lionel Fontagne of Banque de France presenting new research on how firms respond to energy price shocks – and the implications for a wide range of national and supranational policies, including energy subsidies and energy efficiency incentives for households and businesses, reforms of European’s electricity market, and the transition to cleaner energy sources.

In the immediate aftermath of Russia’s invasion of Ukraine and the resulting spike in gas and electricity prices, there were widespread concerns about the potential threat to Europe’s manufacturing industry, fears that have largely been allayed by the apparent resilience of the sector. The report, co-authored with Gianluca Orefice, explores the mechanisms behind this response at the firm level, drawing on data from past energy price shocks in France.

Following the presentation, there was a panel discussion featuring Julien Martin of Université du Québec à Montréal and Vincent Sterk of University College London, moderated by Martin Flodén, Deputy Governor of Riksbank.