25 April 2017
Alleviating Fuel Poverty in Europe

By the Buildings Performance Institute Europe (BPIE)
Autumn 2014

Between 50 and 125 million Europeans are affected by fuel poverty, with high numbers in Central and Eastern EU countries such as Bulgaria, Romania, Latvia, Lithuania, and Hungary. The European population is ageing, consequently increasing the number of vulnerable people. To add, between 2010 and 2012 the employment rate in the EU remained stagnant at 68.4%.

Since the economic crisis and the increase of energy prices affecting all European households, fuel poverty has been steadily pushed higher up on the European political agenda. It is not only a major problem for the so called 'new' Member States but is gaining momentum in historically stronger economies like the UK, France and Germany.

While there is no commonly agreed definition of fuel poverty, analyses show that it is linked with financial vulnerability as they share the same drivers. Among the main causes of fuel poverty are low household income, high energy costs and the poor energy efficiency state of the home. In terms of indicators used to describe and measure fuel poverty, several have been identified: the inability to keep a home adequately warm; the presence of a leaking roof, damp walls, floors or foundation, or a rot in window frames or floor; as well as arrears in utility bills. In 2012, 10.8% of the total European population were unable to keep their home adequately warm, increasing to 24.4% when referring to low-income people. For a more general overview, in Bulgaria, Hungary, Greece and Latvia, people at risk of poverty have the highest rates for all three fuel poverty indicators.

Fuel poverty is not only an important economic and social issue; it has severe health impacts as supported by many medical studies. Consequences are excess winter deaths, mental disability, respiratory and circulatory problems. Excess winter deaths (EWD) are defined as the difference between the number of deaths which occurred in winter (December to March) and the average number of deaths during the preceding four months and the subsequent four months. Their number is increasingly worrisome as between 30% and 50% are actually attributed to poor housing conditions. Moreover, EWD is not a problem characteristic only to northern European countries, but it also affects the South of the continent, where winters are supposedly warmer.

Fuel poverty is mainly a problem of low income households unable to make energy efficiency investments and which are therefore strongly affected by fuel prices increase. There is also evidence that energy costs are growing faster than household income. Eurostat data points to a strong correlation between risk of poverty and arrears on energy bills.

In many European countries the state offers support to low income households by providing energy subsidies or direct financial support for heating. However, this is not a long-term solution to the problem because energy price regulation and direct financial support to fuel poor people require continuous public budget allocation without generating added value or economic growth. In contrast, energy renovations could create an economic lever and be a long-term answer to fuel poverty by reducing energy costs and ensuring improved thermal comfort. Larger scale energy efficiency measures can create or maintain jobs, reduce illness, rehabilitate poor districts and therefore contribute to social inclusion. Results from implemented energy renovation programmes targeting the fuel poor highlight these positive effects. But even if energy efficiency measures have proven their worth and sustainability, they continue to receive lower funding compared to income and fuel price support schemes.

In the UK, the total budget allocated to fuel poverty measures dropped by 20% from 2008 to 2014 adding to this gap in funding. Income support programmes receive the highest share of the budget (70%) while only a small percentage is allocated to energy efficiency measures. The same case about funding priorities can be made for Ireland and Greece.

In order to achieve the social, environmental and energy goals set by the EU for 2020, BPIE's latest report on the issue recommends to allocate a bigger share of European funds and national budgets for renovation programmes targeting social housing and neighbourhoods of fuel poor households. One way of sustaining measures intended to alleviate fuel poverty and protect vulnerable consumers are EU Cohesion Funds. Thus, energy efficiency in buildings can be supported by all three Cohesion Policy financial instruments, especially since most of these funds are distributed in countries with the highest number of people affected by fuel poverty. It is estimated that €1 euro of subsidy in energy efficiency projects can leverage €9 to €12.50 euros of private funding. Therefore, on top of the €23 billion foreseen in the Cohesion Policy 2014-2020 for low carbon schemes, an additional €207-287.5 billion of private funds could be invested in energy efficiency projects.

A key priority at Member State level should be shifting price control mechanism and fuel subsidies to more active and effective public expenditure on renovation measures. But to create a reliable basis for policy making in this field and to provide additional evidence on the scale and impact of fuel poverty in the EU, it is also recommended to improve the availability of statistical data.

Indeed, the data available thus far proves the existence of patterns and trends such as the continuous increase of energy prices concurrent with a lack of growing household net incomes and a marginal decrease of energy consumption per dwelling. All these factors signal that Europe is moving deeper into fuel poverty. This alone should raise concerns about the lack of a long term strategy for fuel poverty alleviation in the EU.

The Buildings Performance Institute Europe (BPIE) is a European not-for-profit think-tank with a focus on knowledge creation and dissemination for evidence-based policy making in the field of energy performance in buildings. BPIE delivers policy and advice as well as implementation support. The Brusselsbased institute is the European partner of the Global Buildings Performance Network (GBPN).

To read the full report Alleviating Fuel Poverty in the EU, consult BPIE's website: bpie.eu