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The Distributional Effects of Pathways to Net Zero and the Implications for Fuel and Transport Poverty

A key challenge associated with the transition to net zero is how to fairly spread the costs and benefits of policies used to achieve decarbonisation across all aspects of society.

This study formed part of the CREDS-funded FAIR project, and explored whether new inequalities may emerge, or existing inequalities worsen within UK society, because of policies designed to transition the UK to a net zero economy and society. 

It specifically considers the vulnerability of different types of representative households to fuel and transport poverty as a result of three different policy approaches to achieving net zero.

Key takeaways
  • Households on low-income, households with children, ethnic minority households and households with health and/or mobility difficulties are all predisposed to experience energy and transport poverty combined.
  • Without the appropriate support, these groups are vulnerable to financial hardship when paying their energy and transport costs in the UK’s energy transition.
  • Worsening inequalities may emerge if there is no appropriate policy that recognises the potential ‘winners’ and ‘losers’ of the transition to net zero.
CREDS fair report
The Distributional Effects of Pathways to Net-Zero and the Implications for Fuel and Transport Poverty
Authors: Ornella Dellaccio, Jennifer Dicks, Michael McGovern and Jon Stenning.
Download the Report

Economic Impacts

Three scenarios were designed to explore the macroeconomic and distributional impacts of alternative pathways to net zero for the UK economy and for different household archetypes. 

1

Climate policy generates favourable outcomes for the environment, economy and society as a whole, creating a win-win situation in which emissions are reduced, while at the same time the economy grows, and new employment opportunities are created.

3

In 2035, households which are vulnerable to fuel and/or transport poverty, for example pensioners with health conditions, or low-income households, particularly from ethnic minorities and living in social housing, will be disproportionately affected by the decarbonisation pathways.

Their equity-weighted energy bills are estimated to be higher than more affluent households, and they cannot take advantage of switching to electric vehicles which have lower running costs than petrol and diesel cars.

2

More ambitious climate action (in terms of emissions reductions) can lead to even greater gains for the environment, economy and society.

 

4

Less vulnerable groups are not as greatly affected, or even benefit from the transition to net zero. Retired couples and families on average incomes and young to middle-aged households on high income tend to pay substantially lower annual household energy bills (when equity-weighting is taken into account). Wealthier households are expected to make financial savings from their ability to switch from using a petrol or diesel car to driving an electric vehicle.

                                                                            

Get in Touch

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Jen Dicks

Head of UK Environmental Policy

t: +44 1223 533139

e:jd@camecon.com

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