In a recent study, we find that giving everyone in society a basic amount of free, renewable electricity and access to free public transport has the potential to significantly reduce emissions and energy poverty.
It is increasingly acknowledged in public debates that tackling the climate emergency needs to be socially just and ensure that everyone’s basic needs are met. Many climate change and green deal policy packages propose an increase of carbon taxes. But the problem with carbon taxes on essentials such as home energy is that they have highly regressive distributional impacts: they burden poorer households much more than richer households relative to income.
These socially unfair distributional impacts of carbon taxes could be tackled in various ways. One option would be to redistribute the carbon tax revenue to the population in cash, for instance on an equal per capita basis or through the tax and benefit system. The second option would be to use the tax revenue to give people access to free renewable electricity and/or public transport.
Which of these options might be better from a distributional, emissions and needs satisfaction perspective? When it comes to distributional impacts, the cash and green services options are defined identically in this study: everyone would receive the same amount in cash or in-kind. Equal per capita redistribution in both schemes shows strongly progressive distributional outcomes where poorer households gain more than richer households relative to income.
The financial equivalence of the schemes enabled us to concentrate on comparing emission and energy policy impacts of the two options. Here we find indeed significant differences. Guaranteeing everyone in society access to a free, basic amount of renewable electricity and/or public transport would create the need to rapidly expand renewable electricity generation and public transport infrastructures so that the increased demand can be met (in practice, everyone’s electricity consumption would still be a mix of electricity generated by different means fed into the grid, but the proportion of renewable electricity in the grid would need to increase to cover a basic amount of renewable electricity per person). This could most effectively and quickly be achieved if governments directly invested into expanding renewable electricity generation and public transport. The higher emission reductions in the “green services” scenario compared to the tax rebate scenario result from a replacement of normal grid electricity with renewable electricity and of motor fuels with public transport covered by the per-person green services provision. While, in theory, the cash tax rebate scenario could also operate in a context in which renewable electricity generation and public transport systems are rapidly expanded and replace their dirtier counterparts, this is unlikely to happen at current rates of decarbonisation and without additional government intervention.
Giving everyone in society a free, basic amount of renewable electricity and/or public transport can also make an important contribution to improving needs satisfaction. The study applies the “low income, high cost” definition of energy poverty. This definition has its problems because it does not capture energy poverty related to under-consumption, but it is a measurable definition that has been applied by the UK government for several years. Based on this definition, the study shows that carbon taxes result in an increase in fuel and transport poverty because the taxes increase people’s expenditure on these essentials. Returning the tax revenue back to people in cash does not address the higher expenditure, and therefore does little to reduce the increased fuel and transport poverty created by the taxes. Only the second option of providing everyone in society with basic amounts of free renewable electricity and public transport reduces fuel and transport poverty because it reduces household expenditure on these essentials. Providing everyone with basic amounts of energy and transport would also address forms of energy poverty hidden from statistics that exist if people consume less than they actually need because they cannot afford to. It would also be consistent with the principles of the Social Guarantee which is based on everybody’s right to have access to life’s essentials and thus to be able to meet one’s basic needs.
Uptake could be supported in several ways, e.g. electricity providers could be obliged not to charge for a basic amount of kWh per person so that consumers do not have to actively “claim” their allowance. Uptake of public transport is more difficult and complex but could be supported by giving everyone an online account with a pre-paid amount of journeys that can be drawn from when entering a bus or train. Improved quality of provision would be essential to increase uptake, especially in less well connected areas, and allocations could be tradeable (and/or exchangeable for car share schemes and similar programmes) to reduce disadvantage for people in remote areas.
There was no space in the study to discuss questions around the ownership and governance of energy and transport infrastructure, but these would be important questions to tackle based on insights from previous research on Universal Basic Services and the Foundational Economy.
Dr Milena Büchs is an Associate Professor in Sustainability, Economics and Low Carbon Transitions at the University of Leeds