Four years after the last energy crisis, policymakers face a familiar challenge as prices surge again. In 2022, governments spent over 3% of national income on energy support packages, yet less than a quarter reached those most in need. The temptation to cap prices for everyone proved both expensive and inefficient, benefiting wealthier households while reducing incentives for conservation.

Germany's innovative 'price brake' offers a better model, subsidizing only 80% of historical consumption while maintaining market prices on the margin. This approach encourages efficiency while protecting vulnerable households. Similarly, targeted 'social tariffs' could help low-income families without distorting market signals for everyone else. The key is balancing assistance with continued price signals that drive conservation.

Central banks face their own dilemma: tightening policy to control inflation could worsen the economic pain from energy shocks while potentially slowing the transition away from fossil fuels. Meanwhile, the rise of renewables has created highly volatile daily electricity prices, making it crucial to use pricing mechanisms that encourage consumption during off-peak hours. Smart subsidies linked to actual energy-saving behavior, combined with windfall taxes on excess profits, could fund targeted support while maintaining incentives for efficiency. The experience of 2022 provides clear lessons - the question is whether policymakers will learn from past mistakes.