Energy Use Caps under Scrutiny: An Ecological Economics Perspective

Abstract

To tackle climate change from an ecological economics perspective, systematic approaches are needed, which maxime environmental and social benefits, while minimizing harmful trade-offs. To avoid climate catastrophe, radical solutions are needed, but these solutions should consider social justice while striving for environmental sustainability. Since energy use contributes significantly to carbon dioxide emission, I analysed already developed energy capping schemes from an ecological economics perspective. Due to the fact that energy capping schemes are more deeply developed for the residential sector, I narrowed down my focus on the so-called Personal Carbon Trading schemes (PCTs). These schemes set an absolute set of fossil energy use or carbon emission of a country/region in line with the national/regional carbon emissions targets, and then lower the set cap until it reaches sustainable scale. Among the PCTs, I focused on those, which would limit energy use, as an input side regulation mechanism. Since two goals of ecological economics: reaching sustainable scale and effective allocation are relatively easily reachable through implementing energy caps for the residential sectors, I scrutinized more deeply the third goal: reaching just distribution. I aimed to reveal the interlinkages between residential energy use and social justice as well as how a potential residential energy capping scheme would influence the well-being of the Hungarian population. To answer my research questions, I analysed Hungarian household energy use data as well as carried out expert interviews to enable a more robust interpretation of the quantitative data as well as provide information on missing data from the official dataset. For this, I used for the secondary data analysis the SILC database, collected at EU level by Eurostat, and using or creating variables based on theoretical literature reviews including justice theories linked to fair and sustainable energy use as well as methodological reviews including methods and data of assessing residential energy use. I aimed to create statistically significantly different groups of households based on their cost paid for different energy sources. Considering justice theories and the methodological literature review, I selected different socio-economic variables and revealed the correlation between them and the created cluster membership variables using cross tabulation, multinomial regression and discriminant analysis. According to the results of analysing secondary data, all the three newly created variables (dwelling_type, share_energy: share of energy cost in household maintenance expenditures, heating_source) had a role to play in characterizing energy use. Based on energy costs paid for different energy sources, groups of the Hungarian population were created: using primarily 1. Other fuel (mainly solid fuels), 2. (Piped) gas, 3. Central heating, 4. Mix of electricity and gas for heating). The chosen 20 socio-economic variables including the three created variables play a role in defining these four groups. Households using mostly solid fuel live in bigger flats with bigger families, under the worst living and dwelling conditions and pay more on energy from the total housing costs than households in the other three clusters. The reference person of these households have a lower level of education, while these households are underrepresented in the richest income decile compared to the other three household clusters. They consume slightly more energy than the Hungarian average, meaning that if an energy quota scheme based on equal per capita distribution is implemented, it would not benefit them automatically. Households using primarily piped gas also live in bigger flats, mostly in family houses. They are following households from the other fuel clusters in spending proportionally more on energy for the total household budget, but they are reported as possessing the best living conditions conditions along with central heating households in terms of keeping their homes warm, covering household maintenance cost, paying their bills on time, ability to meet their needs and the level of satisfaction in their living. Households belonging to this cluster are proportionally found more often in the five top income deciles than households from the other fuel and the mix clusters. The implementation of an energy capping scheme would not benefit them at all, since in general they use 1.5 times more energy than the Hungarian average. Households of the central heating and the mix clusters pay proportionally much less on energy from the total housing costs than their counterparts from the other fuel and the gas clusters. Central heated households are mostly found in the capital’s and in big cities’ panels, and the energy capping scheme would be neutral for them, since they use the Hungarian average energy amount. Households of the mixed clusters are reported the second worst in terms of dwelling and living conditions as well as financial income, while spending the most on education. These households, however, are the ones who definitely benefit from an energy cappoing scheme based on equal per capita distribution, since they use much less energy than the Hungarian average. The interview results were in line with environmental justice theories defining that poor and marginalized are more often exposed to pollution and environmental problems, while left out from opportunities aiming to reduce household energy use. Due to their bad dwelling and equipment conditions causing higher burden to pay energy related costs enhancing energy poverty and thus energy injustice. These people live day to day but cannot access sufficient energy and thus their human capabilities are also hurt. These violations of capabilities are not recognized by the members of society leading to recognitional injustice. In Hungary, an energy capping scheme needs to be implemented with caution. Procedural justice meaning the access to information on opportunities provided by the scheme as well as education from childhood on energy use needs to be granted, ensuring one of the preconditions to mitigate energy poverty and energy injustice. Furthermore, mitigating illegal energy source use, and ensuring proper data collection revealing the underlying causes of energy use are necessary to decrease energy injustice and reach sufficiency for all in energy use. To mitigate challenges in the field of energy and poverty, holistic approaches are needed tackling social and environmental trade-offs, and thus enhancing distributional justice. Therefore, I recommend that further data collection is needed reflecting social justice and revealing their contribution to household energy use. Moreover, strong public support needs to be established using inter alia proper and sound information flow. In case an energy quota scheme is planned to be implemented, it is crucial if social justice and other factors including dwelling conditions are considered, instead of equal per capita distribution. Furthermore, trading mechanisms should be developed with consciousness in order to mitigate loopholes and protect citizens especially the poor and marginalized from financial speculation. Furthermore, job creation should also consider those who possess a lower level of education and increase their employment rate too, not only the well educated or trained people, while investment costs need to be limited in order to ensure motivation to use less and less quotas. Last but not least, non-reported and illegal energy use also should be tackled while developing the energy capping scheme. With these findings of my thesis, I would like to contribute to the policy negotiation under the European Green Deal aiming to reach carbon neutrality by 2050 as well as energy poverty policies of the EU in a just way.