Ensuring a Just Energy Transition for Vulnerable Communities: A Conversation with M. Oprea and I. Rogulj from IEECP
Energy poverty is a socio-economic phenomenon caused by the interaction of three main factors: low incomes, high energy needs due to energy inefficient housing and appliances and high energy prices. At the European scale, the terms ‘energy poverty’ and ‘fuel poverty’ have often been used interchangeably. Originally, energy poverty referred to the lack of access to modern energy services in developing countries, while fuel poverty referred to a problem of affordability in developed countries. Today, the ‘energy poverty’ term encompasses all forms of fuel and energy poverty, in both developed and developing countries, as they are underpinned by the inability to secure sufficient energy services in the home. With increasing numbers of households experiencing energy poverty throughout the European Union (EU), an official definition has been formally included in the recast of the Energy Efficiency Directive (EED) 2023/1791, prompting increasing attention from experts, energy practitioners and policymakers on reducing energy poverty experienced by vulnerable citizens.
Utilising economic indicators, it was found that 10.6% of Europeans were unable to keep their homes adequately warm in 2023 and 1 of 10 Europeans spends as much as 40% or more of their income on housing costs. While these metrics provide an initial glimpse into the extent of energy poverty across the EU, its multidimensional nature suggest the actual situation is likely even more severe. Minority groups such as women (particularly those acting as single parents), migrants, the elderly, and the disabled, to name a few, are particularly susceptible to experiencing energy poverty.
This situation is even more pronounced when it comes to the Private Rented Sector (PRS) where 30% of EU citizens reside. According to data from the H2020 ENPOR Energy Poverty Dashboard (EPD), PRS households across Europe face energy-related issues to a considerably greater extent than the general population, while rented homes being, on average, the least energy efficient across all housing sectors. Notable cases are Spain and Ireland, where energy poverty in the PRS is twice as high as in the overall population.
Moreover, most interventions to address issues of energy poverty, energy efficiency and building renovations in the housing stock have also been concentrated in urban areas, where economies of scale are more easily achieved due to a greater concentration of people and housing. However, there is now a substantive body of evidence to suggest that rural areas in Europe are increasingly being left behind in the achievement of a clean and just energy transition. This is despite the fact that rural residents in Europe are at a significantly higher risk of facing poverty and social exclusion
To effectively address this issue, the EU is directing its policy action to emphasise the necessity of mitigating energy poverty through the European Green Deal, the Clean Energy for All Europeans legislation and the “Fit-for-55” package. Following this direction, several MS have created strategies to tackle energy poverty.
What does new ETS regulation change for vulnerable consumers?
Additional to the existing Emission Trading Scheme in industry and energy production, as part of the 2023 revisions of the ETS Directive, a new emissions trading system named ETS2 was created, separate from the existing EU ETS. This new system will cover and address the CO2 emissions from fuel combustion in buildings, road transport and additional sectors (mainly small industry not covered by the existing EU ETS).[1] ETS2 will inevitably change the energy expenditure for households and companies, including vulnerable consumers. Low-income households with limited means to invest in energy-efficient upgrades or switch technologies (like better insulation or electric vehicles) may struggle to adapt to higher prices. The additional costs for transport and heating could indirectly increase the prices of goods and services, further straining low-income households and small companies.
A vital element is the establishment of an earmarked Social Climate Fund of €72.2 billion to address energy poor and vulnerable citizens, transport users and micro – enterprises affected by the introduction of the ETS2. Countries are currently working on drafting their Social Climate Plans with due care that the final effects of the ETS2 are primarily positive – emission reduction on the level of 43%.
Provided solutions
In order to mitigate the effects of energy poverty on the most vulnerable populations in Europe, a number of European projects have been or are currently designing solutions targeted at alleviating energy poverty. These include:
H2020-funded ENPOR project which sought to alleviate energy poverty in the European PRS within 7 MS via the implementation of 10 policies and measures adapted to the PRS.
LIFE-funded RENOVERTY project that aims to alleviate energy poverty in rural and peri-urban households across CEE, SEE, a SE country via the development of tailored renovation roadmaps.
LIFE-funded ASSERT project that will assist people with physical impairments in energy poverty via large-scale multi-actor training and mentorship programmes.
LIFE-funded JUSTEM which is reducing local energy poverty by engaging the population in the transition to a greener future via the development or implementation of the regions’ energy and climate plans.
LIFE- funded LOCATEE that is aiding local authorities in tackling energy poverty in private multi-apartment buildings.
[1] ETS2: buildings, road transport and additional sectors - European Commission