The Path to Equitable Energy Transition

In the 19th century Bentham recognized the exploitive character of the capitalist relationship. Inequality and inequity are not interchangeable. Inequity is unfair, avoidable differences arising from poor governance, corruption, or cultural exclusion. It is the result of human failure giving rise to avoidable deaths and disease. It is necessary to focus on the economy with its multifaceted connections to social issues. Inequities reduce the freedom and opportunities for an individual to reach their full potential in general, and wellness or good health, in particular. Inequity is the biggest factor affecting the health of the population. People who live in poor housing that is energy inefficient, with instable and low-quality employment are more likely to suffer from poor health. These factors which contribute to poor health also contribute to increased risk for energy poverty. Thus, social determinants of health are an important predictor and determinant of energy poverty.

Poverty is about not having enough money to meet basic needs including food, clothing and shelter. Poverty is a root cause of homelessness and those affected most by poverty such as Aboriginal peoples, recent immigrants, young families with children, women and especially single mothers are also the ones facing housing insecurity. Housing insecurity can affect anyone, but disproportionately affect lower income families, as they often have to pay higher proportions of their income on cost of rent and utilities. Poverty means not being able to heat your home, pay your rent, or buy the essentials for your children. It means waking up every day facing insecurity, uncertainty, and impossible decisions about money. It means facing marginalisation – and even discrimination – because of your financial circumstances. The constant stress it causes can lead to problems that deprive people of the chance to play a full part in society.

By definition alone, the concept of poverty is pretty vague. That’s why there are different ways of measuring poverty, such as, income below minimal income standard getting by day by day but under pressure, difficult to mange unexpected costs and events. At 75% of MIS (minimum income standard): not enough income that falls substantially short of a decent standard of living with a high chance of not meeting needs. Then there are the destitute who can’t afford to eat, keep clean and stay warm and dry. Energy poverty is usually defined in energy studies in two ways: lack of access to electricity and dependence of the household energy needs on burning solid biomass using inefficient and polluting ways. Energy poverty has a range of impacts – and older people, especially if they have health issues and limited income, are particularly vulnerable. The most concerning impacts are food insecurity, inability to purchase essential items, poor health due to thermal discomfort and social exclusion.

Energy poverty manifests itself in a high percentage of income spent covering energy bills, increased risk of electricity shutoffs, and a household’s inability to maintain comfortable indoor temperatures or use desired services (e.g., air conditioning, heat, computers). An often-overlooked space in energy poverty analysis lies in the cavity between metrics that measure financial stress (energy burden defined as energy expenditure over total income) and complete lack of energy services (utility shutoffs). Within this cavity are the households which limit their energy consumption to reduce financial strain. While energy poverty relates to household factors such as low income, occupancy, and the needs and practices of household members, it is also caused by factors external to the household including the energy inefficiency of the dwelling and of appliances, the type of energy supply, and its cost. In many studies energy poverty is “defined as households that spend more than 10 percent of their income on home energy”.

The capital expenditure needed to improve the energy efficiency of the dwelling is what distinguishes energy poverty from poverty: while increased incomes can lift households out of poverty, it may not lift them out of energy poverty if they still cannot afford, or have no control over (in the case of renters), improving the energy efficiency of their dwelling. Thus, while related, energy poverty is not just a problem of low income. In theory, the revenues from a carbon tax capable of achieving a 2°C target will be large enough to fund substantial policies that can promote equity and protect vulnerable populations. Large benefits will occur even if some revenues are lost to administrative costs or are saved to fund other programs, and they can make the poorest citizens net beneficiaries this decade. Capping fossil fuel prices hurts the climate and is socially unbalanced, as richer people derive higher benefits.

Recycling carbon pricing revenues back to all citizens could yield benefits for low-income households that exceed higher energy costs.  The effect of a carbon tax on the economy would depend on the revenue uses of the policy; without accounting for how the revenues from a carbon tax would be used, such a tax would have a negative effect on the economy. Energy poverty concerns are not just a temporary issue related to the war in Ukraine. Rather, measures to achieve ambitious climate targets, such as pricing greenhouse gas emissions, can also be expected to raise energy prices in the long term. One study suggests, the more carbon pricing revenues are recycled to citizens, the more progressive the scheme becomes. If half of the revenues are recycled, the poorest 20% of the EU population would even turn into net beneficiaries; that is, they would receive transfers exceeding the additional spending needed to cover higher energy prices.

On the other hand, Bloomberg Green reports, a levy on carbon “would risk disproportionately hurting the world’s poorest households that are already suffering the most from global warming. That’s because they tend to spend a larger share of their income on gas, heat, and other emissions-generating activities.” This is the basis of an argument against a carbon tax. For example, a carbon tax on fossil fuels is often regressive in its impact- hurting poorer people relatively more than richer ones. Even when it might be progressive, poorer people still suffer a welfare loss when prices rise, making their consumption basket more expensive. With the price of food and the carbon tax increasing over time, low-income households spend a large share of their total expenditure on food and are less able to adjust to price changes; therefore, they suffer more welfare loss due to price changes. The poor population is more susceptible to the impacts from both climate change damage and abatement.

The neoliberals have been so good at covering their tracks, obscuring what they stand for, and denying the level of coherence which they have achieved in their long march to legitimacy. Neoliberal newspeak claims the free market should dominate virtually all aspects of society, that regulations should be dismantled, and that individual liberty should eclipse all other considerations of fairness, equity, or community welfare. More and more people live with the poverty and job insecurity that flows directly from inequities exacerbated by neoliberal welfare and austerity policies. The ideas of the neoliberal thought collective led to a neglect of social goods not captured by economic indicators, an erosion of democracy, an unhealthy promotion of unbridled individualism and social Darwinism, along with economic inefficiency. In England, the school of Bentham and Mill – utilitarian or philosophical radicals – attacked existing institutions in the name of the greatest good of the greatest number, and succeeded in reforming the top-heavy legal system.

Bentham claims that “liberty is the absence of restraint” and so, to the extent that one is not hindered by others one has liberty and is “free.” Given that pleasure and pain are fundamental to – indeed provide – the standard of value for Bentham, liberty is good (because it is ‘pleasant’) and the restriction of liberty is an evil (because it is painful). Law, which is by its very nature, is a restriction of liberty and painful to those whose freedom is restricted. He recognized that law is necessary for social order and good laws are clearly essential to good government. He saw the positive role to be played by law and government, particularly in achieving community well-being. Bentham rejected “natural rights” claiming ‘real rights’ are fundamentally legal rights, that exist in law. In addition, Bentham recognized that there are some services that are essential to the happiness of an individual and that cannot be left to others to fulfill as they see fit, and so these individuals must be compelled to fulfill them.

Bentham criticized those in power for pursuing their own narrow, socially destructive goals, instead of pursuing happiness for all. His solution was to establish democratic rule by the whole society, rather than by a select class. For Bentham, the legitimate functions of government are social reform and the establishment of the conditions most conductive to promoting the greatest happiness, for the greatest number of people. But there are also behaviors and choices people make that can influence their well-being. First and foremost, addressing equity is not just a conversation about diversity, equity and inclusion, but rather it is about the systems change that needs to happen to address real inequity. Equity is achieving fairness and balance in access to environmental resources (e.g., green space, safe neighborhoods, healthy homes, healthy fisheries), in bearing environmental burdens (e.g., pollution in air, water and on land), and in participating in environmental decision-making.

Putting a price on carbon pollution is widely recognized as the most efficient method to reduce greenhouse gas emissions and drive innovation, but it can translate to heftier home heating and electrical bills.  Energy poverty in countries like Canada may force families to choose between buying groceries or paying rent and heating their homes. Energy poverty also impacts the health of those living in the household – it is directly and indirectly associated with cardio-vascular and respiratory diseases, mental health, and more frequent occurrences of minor illnesses, such as colds and flus. In extreme cases, where heating is disconnected, energy poverty can lead to hypothermia and eviction. While energy poverty relates to household factors such as low income, occupancy, and the needs and practices of household members, it is also caused by factors external to the household including the energy inefficiency of the dwelling and of appliances, the type of energy supply, and its cost.

It is necessary to formally recognize energy poverty as a problem distinct from general poverty at the federal level, in order to develop effective responses. Formal recognition provides an ambitious policy objective with outcomes that matter at the household level. Equitable energy transition requires a definition: a fuel poor household as one which needs to spend more than 10% of its income on all fuel use and to heat its home to an adequate standard of warmth. Key fuel poverty policies should centre on: (1) design indicators that adequately assess the needs of beneficiaries and describe the living conditions of families and communities, who are targeted by such programmes and initiatives, (2) targeted energy efficiency retrofits to support low-income households with high energy costs and, (3) set statutory energy poverty reduction targets to ensure energy poverty remains high on the policy agenda. This includes developing annual fuel poverty statistics to monitor progress against a statutory target and track the proportion of households in fuel poverty using a recognized indicator.

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