Household energy poverty and the “Just Transition”

Energy poverty (EP) is a multidimensional issue and its definition and measurement significantly impact policymaking. In developed countries, EP has gained increasing attention because low-income households allocate a larger proportion of their income to energy bills than wealthier households. Concerns over this issue have grown in the past decade due to the persistent rise in household energy prices: in Europe, for example, retail prices grow by an average 2.3% and 2.1% per year, for electricity and gas, respectively (EU 2020, p. 3). The effects of COVID-19 further aggravated the problem. Governments should pay significant attention to EP as the increased pursuit of decarbonization policies (through carbon pricing and fossil fuel subsidy phase-outs) is also likely to have unwanted redistributive consequences. In this chapter, the possible trade-offs between EP mitigation and decarbonization efforts, pursuing what is called a “just transition,” are first presented. Second, a possible definition of EP and its drivers in developed countries is illustrated, mainly related to insufficient household incomes, inefficient housing conditions and fixtures, and high energy prices. Third, the main approaches to measuring EP are described. Note that the differing outcomes from the various indicators/datasets mean that different EP measures change the size and features of the households to be targeted for policy support. Finally, the issue of data availability is also discussed.