Fuel Poverty and the EU
Are policymakers doing enough to tackle fuel poverty?
In its 2007 review of “Housing, Energy and Thermal Comfort,” the World Health Organisation (WHO) recommended a minimum temperature of 21°C in living rooms, and 18°C in all other rooms as a minimum standard of thermal comfort for the protection of human health. Households requiring 10% or more of their income to attain this WHO standard are considered to be in fuel poverty.
Whilst the term is often referred to by policy makers, fuel poverty is far from a homogeneous term with different terms and measures used to describe the same problem. “Lacking affordable warmth” is a term that is often used in the 34 constituent OECD countries, whilst energy insecurity is a term employed in the United States. In 2012, the conclusions of an independent review of the definition of fuel poverty—commissioned the previous year by the British Government (Department for Energy & Climate Change)—proposed an alternative definition of fuel poverty.
The ‘Hills review’ considered the current ‘10 per cent’ ratio indicator to be unduly sensitive to energy prices, understating the problem when prices are lower, and vice versa, and to technical considerations such as precise temperature standards, as well as the accuracy of income reporting. Furthermore, it considered that this definition clearly encompasses households that are not poor —for example higher-income households with energy inefficient homes. The resulting recommendation of Professor Hills’ review was for a new, revised framework for determining fuel poverty, consisting of twin indicators. These were the ‘Low Income High Costs (LIHC)’ indicator to analyse the extent of the problem, and the ‘Fuel poverty gap’ indicator for analysing the depth (the poverty gap defined as the amount by which the assessed energy needs of fuel poor households exceed the threshold for reasonable costs). This ‘LIHC’ definition of fuel poverty was subsequently adopted by the UK Government —the pros and cons of which, although interesting, go beyond the scope of this article.
Whether opting for the aforementioned ‘10 per cent’ or ‘LIHC’ definition of fuel poverty, broadly speaking the three determinants of fuel poverty are 1) Income, 2) Energy prices and 3) Fuel consumption. Whilst all three can be the target of policy/legislation to mitigate fuel poverty, it is widely considered that improving the thermal efficiency of housing stock—especially targeting those with low incomes and have energy inefficient homes is the most effective way to do this, reducing energy consumption .
Policymakers are increasingly paying attention to the human health considerations of fuel poverty/lacking affordable warmth, and the social element of energy policy is becoming increasingly salient. ‘Excess Winter Death (EWD)’ figures provide a stark reminder to these policymakers of the importance of tackling fuel poverty. (EWDs claimed an estimated 24,000 lives in England and Wales in 2011/12 –although the Department for Energy & Climate Change said that it did not know exactly how many of these were attributable to fuel poverty.)
As mentioned above, a homogeneous definition of fuel/energy poverty is not uniformly employed across the globe. In the EU there is variation from Member State to Member State as to how to define and how to address the issue. Whilst the EU itself is often criticised for not playing a more dominant, coordinating role, the EU has funded projects aiming to undertake cross-national comparison and therefore to look at more general policy recommendations. One such attempt was the ‘European Fuel Poverty and Energy Efficiency (EPEE)’ project in 2009 —funded by the EU’s ‘Intelligent Energy Europe’ initiative. The EPEE Consortium brought together actors with different competences “to apprehend the links between housing, energy and poverty.” Whilst these projects are a source of encouragement, little of substance has entered legislation as a result.
Other European Member States have failed to engage with fuel poverty to the same extent as has the United Kingdom, but the European Commission is resolute in its assertion that tackling this issue must be a task undertaken at national level; Indeed the Energy Roadmap 2050 allows no room for ambiguity in this respect: “Vulnerable consumers are best protected from energy [fuel] poverty through a full implementation by Member States of the existing EU energy legislation and use of innovative energy efficiency solutions. As energy poverty is one of the sources of poverty in Europe, the social aspects of energy pricing should be reflected in the energy policy of Member States.” This reflects points two and three above —tackling fuel poverty through pricing and consumption (energy efficiency).
Whichever definition is adopted, and whichever measures employed, more must be done to tackle fuel poverty. This requires innovation and commitment on the part of EU Member States at national level, but with prolonged winters and inefficient housing stock combining with soaring fuel prices and increasing pressure on household incomes, there is no time to waste.
Stephen N. Rooney