This report is the final in our series on improving support for low-income households through the transition to clean energy. It models a number of policy solutions that would reduce the amount that people on low incomes spend on energy, in order to reduce their energy stress and support a faster transition to clean energy. The results clearly show that measures focused on reducing the size of energy bills (investment in energy efficiency in homes and implementing a fair regulated retail price) and improving people’s capacity to pay (increasing Newstart and better targeted concessions) have a positive impact on reducing energy costs for people on low incomes.
Implementing these measures would contribute to making energy more affordable to the three million people in Australia living in poverty, and mitigate costs that might be associated with a faster transition to clean energy. People on low incomes or experiencing disadvantage are more vulnerable to climate change impacts and a poorly managed transition to a clean economy, as they have less choice and control to manage associated costs, and are less able to cope, adapt and recover from climate change impacts. Efforts to reduce their expenditure on energy could assist with these vulnerabilities.
The situation has not been helped by energy prices rising significantly in the last decade. Any additional costs resulting from a transition to clean energy are keenly felt. However, it is clear that certainty in climate and energy policy is sorely needed and when we get it, it will keep costs down. The current failure to manage the transition is contributing to price rises, in addition to high network costs, retail price gouging and high gas prices. Our previous report found that recent energy price increases have disproportionately affected certain vulnerable groups. The lowest-income households now spend on average 6.4% of their income on energy, while the highestincome households spend on average 1.5%. The report found people receiving Newstart and Youth Allowance, sole parents, lone pensioners and renters are most vulnerable to rising energy prices. Low-income households are more likely to enter retail hardship programs; have their electricity disconnected; and reduce their energy consumption to dangerous levels (e.g. forgoing heating, cooling and cooking). They are also more likely to go without other essentials like medicine and dentist visits, so that they can pay their energy bills. They are also missing out on opportunities to take up clean, affordable energy sources like solar because they lack choice and control. A faster transition to clean energy is necessary and desirable and, if managed well, affordable.
Our first report, Tackling Climate Change and Energy Affordability for Low-income Households, argued that we cannot rein in energy prices unless we have in place policies to facilitate the transition to clean generation. The modelling found that, with the right settings, an emissions reduction mechanism could drive rapid emissions reductions in the electricity sector and put downward pressure on energy prices. Getting the design right is critical. The report concluded that higher emissions reduction targets are desirable and could be achievable coupled with energy affordability reforms. Policies need to focus not only on reducing energy prices, but also on reducing the size of household bills and improving people’s capacity to pay.
Our second report, Energy Stressed in Australia, showed that low-income households pay disproportionately more of their income on energy, and that this has increased in the last decade. Even if energy prices do come down, these households are likely to continue to pay disproportionately more.
SOURCE: Australian Council of Social Service and Brotherhood of St Laurence. “Affordable, Clean Energy for People on Low Incomes.” ACOSS & BSL, January 2019
Produced by the librarians at the Brotherhood of St Laurence in Melbourne, Australia