Energy Affordability in the EU: The Risks of Metric Driven Policies

Abstract

This paper provides a pan-EU mapping of energy affordability using energy expenditure shares. Large variations in energy expenditure shares are identified, with the shares being significantly higher in New Member States than the EU15. First, these variations indicate that a single expenditure-based pan-EU fuel poverty metric is problematic; there is a trade-off between a metric identifying households in most need within individual Member States and one identifying households in a similar position across Member States. Second, household-level data from the UK, France and the Republic of Ireland are used to simulate the impact of ‘policy interventions’, involving energy expenditure reductions or income increases, on the recorded rate of fuel poverty. These simulations highlight that emphasising high-level fuel poverty metrics may distort policymakers’ choices towards improving the ‘picture’ of fuel poverty rather than maximising welfare improvements. Robust impact assessments identifying the fuel poverty interventions which deliver the greatest welfare increases for a given cost offer a better means of policy evaluation.