What do climate policies mean for social justice?
A new report claims the government has significantly overestimated the benefits lower-income households will reap from its blend of climate policies. It says the price impact of placing the additional costs of energy efficiency schemes and other policies on consumer bills is disproportionate for the poorest 10 per cent in society. So does the government need to pay more attention to social justice when making climate policy?
Triple injustice
The Joseph Rowntree Foundation’s (JRF) research, highlights what it calls a “triple injustice” for low income homes: they pay more on their energy bills as a result of carbon policies and benefit less from the measures, even though they are responsible for fewer emissions than richer households. And it says measures the government outlines designed to alleviate the impact – such as giving certain groups money off their energy bills – don’t look like they will do enough to ease the burden on the poorest.
Report author, Simon Roberts, says:
“The poorest fifth of the population have already significantly exceeded the Government’s carbon reduction target for 2020. Their direct household carbon emissions – for home energy, transport and air travel – are already 43% below the GB average. They heat their homes less, drive less, and fly much less.”
According to the latest figures from the Department of Energy and Climate Change, the average household energy bill should go down by seven per cent by 2020, compared to what they would be if the government’s climate and energy policies weren’t in place. The JRF report notes, however, that the richest 10 per cent would receive a 12 per cent comparative reduction, despite the fact that these households are responsible for more emissions.
What’s more, Roberts tells Carbon Brief that when the government says average bills will go down compared to the level they would be at if the policies didn’t exist, that figure that belies a split in the population. He says 55 per cent of households’ bills will go up slightly, while 45 per cent will experience a significant reduction in bills. Of that proportion, the majority will be on higher incomes.
A DECC spokesperson told Carbon Brief there are already measures in place to ensure people who can’t afford schemes like the Green Deal get access to energy efficiency measures to improve energy efficiency and tackle fuel poverty including help with heating and insulation, plus money off bills.”We have clearly set out the impact of all our schemes on household bills and the net impact of our policies leaves the home energy bill lower on average than it would be otherwise.”
But the JRF report claims government projections that its climate policies will comparatively reduce bills fail to address inequalities in income and energy use across the UK, despite government fuel poverty initiatives and social housing renewables generation projects.
Bills versus taxes
Most climate policies are charged to consumers through their energy bills – either directly or indirectly as suppliers pass the costs of green policies through to consumers. But JRF says taxing green policies through energy bills rather than general taxation is regressive because “low-income households spend a higher proportion of their income on energy than richer households”.
Jones tells Carbon Brief that this situation will worsen with the end of the Warm Front initiative – a tax-funded scheme aimed at insulating the poorest households – this spring. As more bill-funded initiatives come in to replace such schemes, Roberts says:
“From 1 April, there will be no taxation-funded programme to insulate vulnerable homes. Poor people are paying for measures on their bills that they used to get from taxation”.
Perversely, loading more costs onto bills to pay for climate and efficiency policies could end up pushing more people into fuel poverty. Roberts points to the introduction of the Warm Home Discount, which offers low-income households £130 off their energy bills, funded through levies on energy charges. He says while it has taken some homes out of fuel poverty, the extra charge will have limited the policy’s impact.
Access to energy efficiency
According to the foundation, another key problem with the government’s carbon reduction policies is that some schemes like the Green Deal or feed-in tariffs (FiTs) for small-scale renewables like solar panels require ready money – or the ability to borrow money for consumers to be able to take advantage of them. This means those that don’t may be unable to benefit from the schemes the government has brought in to help consumers directly reduce their fuel bills.
This is important because the fuel poor are most likely to see the biggest benefits from installing efficiency measures because they are more likely to live in cold, draughty housing, according to previous research for the government by Professor John Hills. The Hills Review on Energy Poverty also recognises that funding policies through consumer bills can increase the fuel poverty gap for those who do not benefit from them.
JRF proposes an alternative to the current model. It prices a large-scale rollout of energy efficiency measures, which it prices at £293 billion. For households that can afford it, they will be able to have such measures installed through the Green Deal. And for those who can’t, the report suggests they could receive insulation funded by general taxation on activities that create emissions, such as energy use – which is currently taxed at 5 per cent VAT, as opposed to the normal 20 per cent rate.
Where fuel bills are still used to fund climate policy, JRF says lower income households could receive compensation for the extra amount they pay on their bills through the existing benefits system.
This sounds like a pretty substantial overhaul. Is the JRF report asking for unrealistic changes to the way we fund climate and efficiency measures? Roberts tells Carbon Brief the government has responded to concerns of this type before:
“The Renewable Heat Incentive [a subsidy scheme aimed at helping households install technology such as heat pumps] was shown to be so regressive if collected through bills, [the government] decided to fund it from general taxation.”
One thing could the government do to make a difference to lower-income could be to establish a tax-funded energy efficiency programme aimed at the poorest in society. Roberts says reintroducing a tax-funded measure of this kind is a “priority”.
It appears there is some agreement that funding policies through bill payments could penalise the less well-off. While the government may not respond by revamping its entire climate package – and not everyone may agree with the particular measures it suggests – JRF’s report highlights mechanisms that could make climate policy fairer.