Energy price spike: Europe's policy responses to the cost-of-living crisis

The disruption to oil and gas supplies following the closure of the Strait of Hormuz has rapidly increased inflationary pressures, undermined energy security and intensified the cost-of-living crisis. Rising energy bills alongside increased transport and food prices have significantly reduced household’s disposable income, while the risk of energy poverty has grown particularly for low-income households and vulnerable groups. For businesses, especially those in energy-intensive industries, the sudden increase in operational costs threatens their competitiveness and, in extreme cases, industrial viability. EU governments are supporting households and businesses during this crisis with measures ranging from immediate financial support for vulnerable households to long-term strategic changes aiming to bolster energy security and accelerate the transition to alternative energy sources. Eurofound has recorded these interventions in its EU PolicyWatch database; this article provides a summary, to give European and national-level policymakers an overview of the current policy landscape.

To support the monitoring and analysis of the legislative and policy responses to the rising cost of living, EU PolicyWatch was updated between April and June 2026 by Eurofound’s national correspondents from each of the 27 Member States and Norway. They identified over 125 distinct measures, which we have categorised into four thematic groupings: sectoral interventions, demand-side management, supply-side structural shifts, and social dialogue and collective bargaining initiatives (Table 1). Many straddle more than one category; our categorisation reflects the primary policy intent. Readers of this article can also refer to the database, which is updated regularly.

A substantial share of the measures target specific sectors that are disproportionately affected by energy price volatility. Such measures have been reported in all Member States and Norway. Unsurprisingly, measures targeting the energy sector were among the most frequently reported. Initiatives aiming to protect consumers from extreme price spikes, consisting of electricity price caps, energy vouchers and credits, have been launched in Belgium, France and Hungary. More specific targeted measures have also been implemented, for example lower tariffs on electricity and gas for lowincome households in Austria and Spain. Direct subsidies to energy providers are being used across many countries (for example Croatia, Germany and Slovenia) to maintain stable rates for both residential and industrial consumers. Portugal, meanwhile, set up the Energy Resilience Facility credit scheme for companies affected by the sharp rise in energy costs.

Given its heavy reliance on fossil fuels, the transport sector has received particular attention, with several countries reducing fuel excise duty (for example Cyprus, Czechia, Latvia, Ireland, Romania, Poland and Sweden) or cancelling planned increases (as was the case in Estonia) or capping forecourt pump prices (as Czechia, France and Romania, among others, have done). Croatia introduced temporary moratoriums on loan repayments for small retailers in the petroleum products trade. Other Member States have provided direct subsidies to road hauliers and public transport operators to prevent service cuts or fare increases being passed on to passengers (Bulgaria and Greece, among others). In several countries, public transport fares at national, regional or local level have been reduced (Lithuania, Romania and Sweden) or free travel schemes have been introduced (Denmark), partly to support household budgets and partly to encourage a shift away from private car use. 

Rising fertiliser and fuel costs have placed immense pressure on the agriculture and food production sectors. Policy responses include direct financial aid to farmers to offset increased input costs (Cyprus, Greece, Italy and the Netherlands), as well as emergency credit lines for the agri-food sector to stabilise food supply chains (for example in Austria and Sweden), in order to prevent further food inflation. Several other energy-intensive industries (including steel, chemicals and ceramics) as well as small and medium-sized enterprises have been targeted by compensation schemes or received temporary relief from certain energy levies to preserve competitiveness and employment.

The second group of measures are designed to reduce the overall consumption of energy, both to ease pressure on prices and to support climate objectives. These include building renovation subsidies, such as the Dutch National Heat Fund and housing energy efficiency support, aimed at improving insulation and reducing heating costs. Another Dutch example, originally planned for 2027 but brought forward to 2026, aims to incentivise lower- and middle-income households to trade in their petrol and diesel vehicles for second-hand electric cars. The measure explicitly aims to avoid a criticism levelled at earlier Dutch electric vehicle subsidies, discontinued in January 2025, that tax advantages for electric vehicles disproportionately benefited higher-income groups and company car drivers. A similar measure was reintroduced in Germany in May 2026, having been discontinued in 2023.

Spain has reduced the deadline for organisations to approve sustainable mobility-to-work plans from 24 to 12 months. The objective of these plans, required for companies and public sector entities with more than 200 workers, or more than 100 workers per shift, is to reduce commuting-related energy consumption by promoting active mobility, collective transport, shared mobility, zero-emission charging infrastructure and, where feasible, the introduction of telework.

In Denmark, a proposal to reduce transport costs for households by lowering the fuel taxes and value-added tax (VAT) on petrol and diesel to the minimum levels permitted under EU legislation was not supported. It was replaced with a temporary increase in the commuting tax deduction to encourage the use of public transport instead of personal vehicles.

A third category of measures addresses the root causes of energy dependency and price volatility. These are long-term, strategic interventions intended to diversify the energy mix and enhance the autonomy of Member States. One example is Malta’s efforts to ensure its energy security by shifting away from its traditional approach of using a long-term hedging mechanism during periods of high global energy market volatility. Its new strategy is one of energy diversification complemented by the Renewable Energy Sources Scheme, which supports the purchase of photovoltaic systems and was renewed in April 2026.

In Norway, discussions on fuel preparedness predated the current crisis. Given that the country is a significant net exporter of oil, it has no storage obligation under the International Energy Agency (IEA) regulations. Consequently, Norway’s national fuel reserves have sufficient capacity to last 20 days, while countries like Sweden and Finland hold reserves for 90 days. During the revision of the national budget in May 2026, a proposal to address the limited fuel storage capacity was put forward. Both employers and trade union representatives welcomed the proposal, given the need to prepare for serious disruptions to the supply of food and fuel and the ability of businesses to maintain their operations.

Denmark’s government has proposed an emergency plan to prioritise electricity grid access over data centres to address growing capacity constraints in Denmark’s electricity grid. If the measure is approved, the current first-come, first-served principle would be replaced with a system that allows energy network operators to prioritise connections based on societal needs.

Finland, notably, has decided not to introduce a support package in response to the 2026 energy shock. Such a measure would have been similar to the temporary measures introduced in 2023 to increase people’s purchasing power in the face of rising prices of consumer goods. According to the country’s government, Finland's exposure to the 2026 shock has been cushioned compared with most Member States by its high share of emission-free electricity generation.

In many Member States, the social partners have been consulted during the design of energy relief packages. In contrast to the process of designing responses to cushion the impact of inflation in 2022, the social partners have been directly involved or involved as part of tripartite consultation in more than a third of the measures recorded in 2026. Several cases are clear examples of how collective bargaining agreements have been used to address the cost of living. In Luxembourg, the tripartite 2026 Resilience Package agreement consists of 20 measures negotiated and agreed between the government and the representatives of workers and business to address the negative effects of the energy and economic crisis marked by a persistent rise in electricity prices since 2022. As early as March, social partner organisations in several countries were calling for action to mitigate the negative effects of the sharp increase in energy and fuel prices, while in Estonia and Denmark employer organisations proposed concrete actions plans.

While the social partner views recorded in the database are mixed, some expressed positive views, mostly for subsidies for transport and energy costs and housing efficiency measures and for measures targeting low-income households and small businesses (for example in Austria, Croatia, France, Spain and Sweden). They also supported strategic forward-looking policies (for example in Malta and Portugal). They have, however, been critical too, especially in relation to general measures for relief of energy costs, arguing that they should be targeted at those on lower incomes (Netherlands and Poland, among others) or take a longer-term rather than an ad hoc approach (as was the case in Germany and Greece, for example).

Most of the measures recorded have already been implemented and are in force, reflecting the urgency with which national, regional and local governments have responded to the energy price shock. A smaller number have been recorded as proposals – such as VAT reductions on food in Denmark and the stabilisation of daily fuel price increases in Lithuania – and are awaiting parliamentary approval, budgetary allocation or further social partner consultation.

Many financial support measures, including energy vouchers, tariff caps and excise duty reductions, have been introduced on a temporary basis, typically for a period of 3 to 12 months, with several governments building in review clauses linked to wholesale energy price developments. By contrast, measures relating to renewable energy investment, building renovation and energy efficiency tend to be open-ended or multi-year in nature, reflecting their structural rather than emergency character. This pattern suggests a broadly consistent logic across Member States, whereby immediate price relief is treated as a temporary bridge, while investment in energy diversification and efficiency is approached as a longer-term, open-ended commitment.

The cost-of-living crisis triggered by the closure of the Strait of Hormuz has required the adoption of urgent, targeted relief measures to support the purchasing power of citizens and to help businesses to stay afloat. Such measures have been supplemented by several longer-term strategic measures aimed at supporting Member States’ economies beyond the current squeeze on fossil fuel supplies.

Compared with the policies adopted after the Russian invasion of Ukraine, in the balance between short-term relief measures and long-term strategic policies, the latter seem to have gained importance, as we see slightly more cases of structural reforms and investments.      

In times of crisis, social dialogue can provide a tool to engage the social partners in policy development beyond a merely procedural requirement. It can be a vital tool for ensuring the social legitimacy of policy responses to efficiently manage the impact of inflation on wages, productivity and resilience.

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