Energy transition and social justice: Do renewable energy levies have an impact on income distribution and energy poverty? [post]

Jan Priesmann, Saskia Spiegelburg, Reinhard Madlener, Aaron Praktiknjo
2021 unpublished
Energy systems are decidedly the largest emitters of greenhouse gases. Therefore, transitioning them from fossil to renewable systems is a top priority for societies committed to reducing greenhouse gas emissions. However, such transitions involve substantial costs. In many cases, these costs are proportionally passed on to final energy consumers through levies on their electricity consumption. In our paper, we investigate the impacts of renewable support levies on social justice or, more
more » ... ically, on income inequality. For our study, we chose Germany where inflation-adjusted electricity prices for private households increased substantially because of such a levy for renewables. We base our analyses on representative household panel data with over 40,000 households from 2003 to 2018. Our results indicate that indiscriminate renewable support levies on electricity consumption increase income inequality and energy poverty. For our case in 2018, renewable support levies alone led to a relative increase of ~0.23% of the Gini coefficient and ~11.31% of the high cost low income (HCLI) energy poverty indicator measuring energy poverty intensity. Based on our findings, we propose a reform of the renewable support levy and analyze three options: (1) the abolition of the levy, (2) levies which are income-progressive proportionally to the income taxes, and (3) a high and flat levy in conjunction with an income-degressive compensation payment. Our ex-post analyses for 2018 indicate that a reformed levy system would have slightly decreased overall income inequality with relative decreases of ~0.23%, ~0.32%, and ~0.59% of the Gini coefficient for options (1), (2), and (3), respectively. But more importantly, such a system would have substantially decreased energy poverty by ~11.31%, ~30.45%, and ~31.45% for the HCLI energy poverty indicator for options (1), (2), and (3), respectively.
doi:10.21203/rs.3.rs-754301/v1 fatcat:bblsvl5zwbd2leg5pbmlhk7kk4