Melbourne Energy Institute

Energy Policy and Social Justice

Overview

Meeting the costs of domestic energy consumption already represents a substantial burden with which many poorer households struggle, with electricity prices now more than 50 percent higher on average than in 2000. It is expected that the cost of energy will rise even more substantially over the next decade following the introduction of the carbon pollution reduction scheme.  The charging of higher energy prices as a means of curtailing energy use, however, raises important social justice concerns since the burdens of these higher energy costs will not necessarily be distributed fairly between energy users.

Low-income households typically:

  • consume less discretionary energy than wealthier households;
  • rely more heavily on expensive, carbon intensive sources of energy for heating, cooking, and hot water;
  • live in less efficient dwellings with poor insulation, shading, and window glazing that makes the cost of meeting their energy needs more expensive.  This is especially so in the case of consumers in rental accommodation if landlords opt to equip properties with cheaper rather than more efficient appliances.

As a result, low-income energy users have a limited ability to adapt or curtail their energy use, making them more vulnerable to higher energy prices.  This might be because:

  • They have already reduced their discretionary consumption as far as possible due to cost concerns
  • Of irregular participation in the labour market through unemployment or disability, leading to higher unavoidable consumption during peak periods.
  • It may be related to a health condition. For instance, people with multiple sclerosis—who are likely to be low-income earners because of a reduced ability to participate in the labour market—are acutely intolerant to heat and so rely extensively on cooling devices in order to achieve a comfortable living and working temperature that most non-MS sufferers can achieve without the need for the use of appliances.

Key social justice concerns with respect to energy policy are therefore whether:

  1. The benefits and burdens of curtailment measures are being distributed equitably between energy users or
  2. The additional burdens that some energy users face in meeting their energy needs ought to be alleviated through, for example, the subsidisation of their consumption or investment in improving the efficiency of this consumption.

Here, one alternative to using market structures to curtail demand is the adoption of measures targeted at enhancing the energy efficiency of households’ through, for instance,

  • government rebates to retrofit low-income homes with energy efficient lighting, ceiling insulation, weather sealing, and solar hot water/heat pumps; improving access to mains gas;
  • government subsidies for disadvantaged households to upgrade to more energy efficient appliances, particularly refrigerators.

Considerable energy savings can be achieved by improving the energy efficiency of buildings and these savings need not come at the expense of higher energy costs for vulnerable energy users.

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