Green uplift: how a net zero economy can reduce fuel and transport poverty

Stuart Dossett

As the cost of living crisis takes hold, an increasing number of UK households are falling into fuel and transport poverty. It is also becoming clearer that the enormous challenge of climate change is threatening health and wellbeing. As we describe in this report, these two problems are connected. But a net zero carbon economy, delivered in the right way, can reduce fuel and transport poverty while helping to grow the economy and employment across the country.

Working with our partners in the FAIR work programme at CREDS (the Centre for Research into Energy Demand Solutions), we have examined the effects that different strategies for cutting carbon emissions across the economy may have on people vulnerable to fuel and transport poverty.

Analysis from a range of sources shows that decarbonisation can lead to positive outcomes across the environment and society over the longer term, and that the economic impacts are more favourable than allowing climate change to continue unchecked (Office for Budget Responsibility, 2021; Batini et al, 2021).

Detailed assessment of some potential impacts of the net zero transition on different groups in society, conducted by Cambridge Econometrics for CREDS, and conversations with a range of stakeholders, has highlighted the need for careful management of this process, to ensure it does not lead to unfairness. While some groups stand to benefit, especially from the switch to electric vehicles (EVs), where running costs are substantially lower than for petrol and diesel cars, this may not be universal.

Some people will be particularly vulnerable to poorly designed policies, especially those on low incomes already experiencing fuel or transport poverty, or both, as their vulnerabilities may increase as a result of electrification of energy and transport (Simcock et al, 2021). Others more at risk include households with children, people with health or mobility difficulties, people from minority ethnic groups and those living in rural locations.

The government has responded to the cost of living crisis through the Energy Price Guarantee and the bus fare cap in England. Alongside these emergency measures, it is more important than ever to intervene and reduce the structural susceptibility of those most at risk of fuel and transport poverty over the longer term.

It is these longer term actions that this report focuses on; although, if implemented early, some of our recommendations will have short term benefits too. The recommended policy actions are complementary and will maximise benftits if implemented together.

We recommend that a policy package to address fuel and transport poverty should include:

1. Better understanding the scale of the problem by improving the monitoring of transport poverty, including a standardised definition of transport poverty across the UK.
2. Sharing access to, and the benefits of, electrification of heating and travel fairly across households with different income levels, with:
   1. an ambitious zero emissions vehicle (ZEV) sales mandate on car manufacturers that quickly translates to a growing used EV car market;
   2. an ambitious sales mandate for heat pumps, akin to the zero emissions vehicle sales mandate on car manufacturers, to drive reductions in the upfront cost of heat pumps;
   3. financial support for heat pump installation in households vulnerable to fuel poverty.

3. Reducing the cost of electricity, and its cost relative to the price of gas, to guarantee cost savings from the electrification of heating and travel.
4. Supporting households to attain a necessary level of heating and transport by:
   1. putting proposed minimum energy efficiency standards into law, for domestic private rented sector and social housing, to reach energy performance certificate (EPC) band C by 2028;
   2. providing financial and non-financial support for households in fuel poverty to install energy efficiency measures;
   3. improving non-car travel choices by expanding public transport route provision, reducing the end user cost and integrating public transport, micro-mobility and walking and cycling networks.

Green Alliance

• Green uplift: How a net zero economy can reduce fuel and transport poverty

Supporting research

• The distributional effects of pathways to net-zero and the implications for fuel and transport poverty | Cambridge Econometrics

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