Regional sensitivities to the energy crisis

November 2022

With the Russian invasion of Ukraine and the following full scale military conflict, the context of Europe´s energy policy changed significantly. The war illustrates Europe’s dependency on energy imports, not at least gas, and how vulnerable regional economies are to shocks in commodity markets.

Firms depending on gas or high energy inputs for their production are particularly challenged by increasing energy prices and the expected energy crisis. The impacts are also clearly felt by citizens, not at least due to inflation which in particular hits households with lower incomes and those already at risk of poverty.

Most of the European analysis of impacts of the war are at macroeconomic or national level. Among others, a first assessment of the national vulnerabilities to impacts of the war in the European economic forecast (summer 2022) (Öffnet in neuem Fenster), focuses on energy, trade & value chains and assets at national level. Latvia, Estonia, Bulgaria, Lithuania, Czechia, Slovakia, Hungary, Poland, Slovenia, Cyprus, Croatia and Greece are the most affected countries. Focusing on the vulnerability of firms, the EIB (Öffnet in neuem Fenster) estimates particularly high stress levels for Lithuania, Greece, Latvia, Poland, Hungary, Croatia and Spain.

Regional energy dependencies

Further developing this to address regional rather than national vulnerabilities requires a broader understanding of sensitivities to the effects of the war. Earlier this summer we made a first attempt to assess regions’ sensitivities to the impacts of the war, taking into account their socio-economic profile and energy dependencies. For more details see our studies for the European Committee of the Regions (Öffnet in neuem Fenster) and the European Parliament (Öffnet in neuem Fenster).