Addressing energy poverty in the EU

The EU aims to improve its energy security and to improve environmental quality. To reach these targets several tools are used, among which market-based instruments are very popular. These tools (taxes and subsidies) are used to send a signal to consumers and to encourage an energy-saving and energy-efficient behaviour. On the other hand, also policies to increase the production and consumption of renewable energies are based on incentives which are financed mainly through household electricity bills. Although these policies can improve energy security – by changing the energy mix—and also mitigate GHG emissions – with production of clean energy –, an adverse effect could be generated by these prices changes because some consumer groups could suffer in terms of affordability of energy expenditures. Therefore, the overall framework of energy and environmental policies must be taken into account to investigate how consumers are affected by changes in energy prices.

The objective of the research is to uncover the relationship between household energy consumption and its socio-demographic determinants and drivers such as income, energy prices, housing types, age, and household size on energy spending. These drivers are analysed at the microeconomic level and income and price elasticities for different household groups are estimated. Results will identify the vulnerable households in terms of energy expenditures that are at risk of being affected by fuel poverty and to whom specific social inclusion policies must be addressed. An additional element to consider is how bounded rationality and cognitive biases can prevent consumers from a full understanding of the - collective and private - benefits of energy saving investments. These biases can hamper the efficacy of public policies, with special regard to energy saving subsidies that may be crucial in coordinating the energy poverty and climate change goals.

The chair holder (Rossella Bardazzi) and co-author (Maria Grazia Pazienza) have analysed in previous work the impact of aging and cohort effects on residential energy consumption, therefore previous results will constitute the base for this new research agenda. Other staff members of the project have done research on energy poverty measurement and related policies (Dr.Berry, Dr.Lavecchia, Prof.Sanin). The Chair will provide added value in fostering networking and leading to further cooperation in research.