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Economic impacts of a drastic gas supply shock and short-term mitigation strategies

Author

Listed:
  • Pichler, Anton
  • Hurt, Jan
  • Reisch, Tobias
  • Stangl, Johannes
  • Thurner, Stefan

Abstract

The Russian invasion of Ukraine on February 24, 2022 entailed the threat of a drastic and sudden reduction of natural gas supply to the European Union. This paper presents a techno-economic analysis of the consequences of a sudden gas supply shock to Austria, one of the most dependent countries on imports of Russian gas. Our analysis comprises (a) a detailed assessment of supply and demand side countermeasures to mitigate the immediate shortfall in Russian gas imports, (b) a mapping of the net reduction in gas supply to industrial sectors to quantify direct economic shocks and expected relative reductions in gross output and (c) the quantification of higher-order economic impacts through using a dynamic out-of-equilibrium input–output model. Our results show that potential economic consequences can range from relatively mild to highly severe, depending on the implementation and success of counteracting mitigation measures. We find that securing alternative gas imports, storage management, and incentivizing fuel switching represent the most important short-term policy levers to mitigate the adverse impacts of a sudden import stop.

Suggested Citation

  • Pichler, Anton & Hurt, Jan & Reisch, Tobias & Stangl, Johannes & Thurner, Stefan, 2024. "Economic impacts of a drastic gas supply shock and short-term mitigation strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
  • Handle: RePEc:eee:jeborg:v:227:y:2024:i:c:s0167268124003640
    DOI: 10.1016/j.jebo.2024.106750
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    References listed on IDEAS

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    More about this item

    Keywords

    Gas dependency; Energy security; Energy policy; Production networks; Shock propagation;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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