Project

Fraunhofer Institute for
Systems and Innovation Research ISI

Energy Efficiency for Low-Income Households

The study “Energy Efficiency for Low-Income Households“ describes the positive influences of improving energy efficiency on both low-income households and the economy as a whole. The study was commissioned by the Committee on Industry, Research and Energy (ITRE-Committee) of the European Parliament to examine if energy efficiency policies should be adapted and extended to actively include low-income households in the context of the revision of the Energy Efficiency Directive (EED) and Energy Performance of Buildings Directive (EPBD).

Background

High energy costs represent a poverty risk for low-income households in particular – because they have to spend too much of their income on energy or because they can no longer afford to pay these costs at all. Combating this so called energy poverty requires to strike the right balance between energy efficiency and social policy measures.

Further, the relevance of promoting energy efficiency in low-income households becomes clear when considering that reaching the EU’s greenhouse gas (GHG) emission reduction targets requires an almost carbon neutral building stock in the European Union by 2050: Residential buildings account for 75% of the European building stock, from which more than 40% was constructed before 1960 and more than 90% before 1990. Low-income households, defined by earning less than 60 % of their respective national median equivalised disposable income, represent about 17 % of households in the EU. Estimates of EU-inhabitants suffering from fuel poverty range between 50-160 million inhabitants and correspond to approximately 6-21% of the total EU-population.

A particular challenge is that energy efficiency policy and social policy have different time horizons and ranges: While social policies primarily target alleviation of financial distress in the short term, energy efficiency policies also have positive ecological, economic and social effects in the medium and long term – the so called multiple benefits of energy efficiency.

Objective, Structure and Methodology

The European Parliament commissioned the Fraunhofer Institute for Systems and Innovation Research ISI, SQ Consult (the Netherlands) and the Universitat Politècnica de Catalunya (Spain) to examine the relevance of energy efficiency for low-income households and to develop proposals for how to design policies targeting specific groups.

The study starts by classifying and analyzing the multiple benefits that energy efficiency has on low-income households. Impacts of energy efficiency are classified in environmental, economic and social impacts. It continues with an analysis of barriers to energy efficiency investments for low-income households. The most relevant barriers for low-income households are analyzed in detail. The study proceeds with an assessment of energy efficiency and social policies that can contribute to remove these barriers. After presenting a comparative analysis of general policies, the study concludes with the elaboration of a set of policy recommendations to improve energy efficiency in the low-income segment. The While six main recommendations are provided in the study, it includes specific suggestions for their consideration in the EU policy framework, the future recast of the EED, the EPBD and the Labelling Directive, and in the design of more effective policies at Member State level.

The analysis is based on a review of scientific literature and policy reports, semi-structured interviews with selected stakeholders pertinent to the policy environment of residential EE as well as an analysis of the policy landscape of energy efficiency based on the MURE database on energy efficiency policies.

Results

The study presents the most important positive effects that improving energy efficiency has on low-income households. These positive effects can only be achieved if the specific barriers in low-income households are dismantled. These include the lack of capital for investments in energy efficiency, missing or insufficient information and the landlord-tenant dilemma.

Policy measures supporting energy efficiency can remove investment barriers. So far, only a few EU member states have implemented targeted measures to promote efficiency in low-income households – but the typical barriers in these households can only be eliminated if this target group is explicitly addressed by policies. First of all, it is important to arrive at a common definition of energy poverty in the EU because a common understanding can make it easier to develop effective measures.

A major recommendation of the study is to design energy efficiency measures so that they have additional social or economic effects besides saving energy – for the target group of low-income households among others. To overcome the landlord-tenant dilemma, for example, it has proven very efficient to combine energy audits with financial instruments that provide loans and subsidies for building renovations – this has overall positive impacts on landlords, tenants and construction companies.

Status

finished

Clients

European Parliament

Partners

  • SQ Consult (Netherlands)

  • Universitat Politècnica de Catalunya (Spain)