Renewable Energy Mandates Are Making Poor People Poorer

Escalating electricity prices are regressive—poorer people pay a higher proportion of their incomes heating and cooling their houses than do richer people. Low-income folks also tend to live in draftier dwellings and retain older, less energy-efficient appliances and climate-control systems. Consequently, anything that raises the price of power will impose bigger relative costs on the poor.

As renewable energy mandates and rising “ecological” taxes have driven up electricity prices, an increase in energy poverty has become a problem in countries such as Germany and the United Kingdom. There are varying definitions for the term, but the newly launched European Union Energy Poverty Observatory defines energy poverty as not being able to afford adequate warmth, cooling, lighting, or the energy to power appliances that guarantee a decent standard of living and health. One shorthand rule is that a household is energy poor if it must spend more than 10 percent of its income on power. The Observatory estimates that 50 million European households now qualify.

Due largely to Germany’s Energiewende—a government-mandated transition from coal and nuclear to wind and solar power—German residential electricity rates have doubled since 2000. Today, households pay about 36 cents per kilowatt-hour (kWh). About 11 cents, or well over half the increase, comes from a renewable energy surcharge and an ecological tax. In Britain, the price of residential electricity has increased by 27 percent in just a decade. Households now pay nearly 22 cents per kWh, with energy and climate change policies accounting for about 10 percent of that amount.

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