Help or hindrance? Does energy efficiency in general and product policy specifically, even up income disparity or make it worse?

Panel: 2. Policy: governance, design, implementation and evaluation challenges

This is a peer-reviewed paper.

Authors:
Kevin Lane, Kevin Lane (Oxford) Ltd, United Kingdom
Fiona Brocklehurst, Ballarat Consulting, United Kingdom
Will Blyth, Oxford Energy Associates

Abstract

Recently, there has been an increasing focus on the wider impacts of energy efficiency policy - beyond reducing costs and carbon emissions. Amongst these impacts is the effect of energy efficiency (EE) policies on income distribution – do they help to reduce or widen the difference in incomes across the population; that is, are they progressive or regressive?

It is generally recognised that household income has an effect on how consumers use energy and how citizens respond to energy policy. For example, lower income groups are generally less able to access the benefits of EE, partly as a result of their lower ability to fund up-front costs of measures.

A number of researchers have looked at this issue for climate change and EE policies. Some have taken a theoretical approach, postulating outcomes rather than undertaking analysis using empirical data, although some studies have found evidence that EE policies focussed on lower income residents have been successful in reducing income inequality.

For product policy specifically, there appears to be a paucity of research using data to evaluate the impacts on income distribution: for each type of policy and for product policy as a whole (strategic combinations of MEPS, labels, grants, etc., which is how it is applied in many economies). The few investigations of the impact on income distribution that have been found tend to be theoretical and focus on implied consumer discount rates and Minimum Energy Performance Standards.

This paper synthesises the literature on the distributional impact of climate and EE policies. It will examine the context for product policy, before examining the literature for product policy specifically. Based on this review, some initial product policy implications will be drawn. Finally, it assesses potential data sources that would enable additional research to better understanding distributional impacts of product policy.