It has been estimated that a 1% increase in fuel prices for residential heating due to carbon tax could raise the proportion of people experiencing fuel poverty from 11.5% to 12%.
Research by the Economic and Social Research Institute (ESRI) on the relationship between income and fuel poverty found that reducing general levels of income poverty of the most vulnerable households is “an important step forward” in reducing fuel poverty.
In addition, improving energy efficiency levels will have an important contribution in reducing fuel poverty.
“When designing policies to tackle fuel poverty, it is important to consider dwelling quality, a broad range of retrofit measures and to avoid regressive funding mechanisms,” the report, authored by Miguel Tovar Reanos, stated.
“In addition, it is important to consider that while carbon taxes can increase the number of fuel poor, this can be overcome by using the additional revenues to finance lump-sum transfers and to encourage investment in energy efficiency by vulnerable households.”
According to the research findings, public acceptability of “low-carbon policy instruments” depends partially on how “distributional effects are addressed”.
Factors increasing probability of being fuel poor
Being a single adult with dependent children, having low education levels, low income levels and having darkness or dampness in the dwelling, increases the probability of being fuel poor, the report noted.
Among income-poor households, fuel-poor households have the lowest income levels, have issues with dampness and are less likely to have double glazing in their dwellings compared to other income-poor households.
“The inability of households to afford a warm home is a growing concern across the world,” the report said.
“The UK and Ireland are forerunners in establishing fuel poverty in the policy and academic debate.
“Previous ESRI research showed that fuel poverty is not a distinct type of deprivation in Ireland and therefore may not warrant a policy response separate to that of addressing poverty and deprivation in general.
“However, our understanding of the relationship between fuel and income poverty is still limited.”
While the European Commission has established a Just Transition Fund to help “protect households most affected by the climate transition”, environmental policies, such as carbon tax, “could increase the challenge of reaching this goal”.