free green services – Milena Büchs

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How to avoid ecological policies having adverse social impacts? Make related services (partially) free.

With energy prices soaring, it is all the more important that the energy poor are protected in the green transition (Viktor_IS/shutterstock.com)

We urgently need new approaches to combine ecological and socio-political goals. Time is running out to tackle climate change: radical action must be taken quickly. However, this is only possible if such action is socially just, ensures the satisfaction of all needs and enjoys public support.

Energy prices in Europe are soaring, risking a significant increase in fuel poverty. Providing a basic set of “green” services free of charge to everyone in society could combine environmental and social goals: it could significantly reduce greenhouse gas emissions, improve need satisfaction, reduce energy poverty and increase social justice.

Universal free green services could include a basic amount of renewable electricity (injected into the grid) or public transport per person funded by carbon or energy taxes. This would reverse the regressive distributional outcomes of household energy or fuel taxes, which tax poor households much more heavily than rich ones relative to household income.

Regressive Effects

Many climate-focused policy packages propose increasing carbon or energy taxes. The European Green Deal is no exception. But the regressive distributional effects of taxes on necessities such as household energy are problematic from a social justice perspective, since poor people tend to have lower emissions than the rich, despite having less investment in energy-efficient homes, appliances, or vehicles.

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The results of the European Social Survey 2016 also show that fuel taxes in most European countries face strong resistance, especially from low-income households. If such taxes are introduced or increased, measures must be taken to avoid socially unjust effects.

Free green services are just one option to address the socially unfair distributional effects of carbon taxes. Another might be equal per person redistribution of tax revenue. In a recent study covering 27 European countries and based on data from the European Household Budget Survey, we examined which of these could be better in terms of distribution, emission reduction and need satisfaction.

In the study, we defined the cash rebate and green services options as financially equivalent: everyone in society would receive the same amount, whether in cash or in kind. We find that equal per capita redistribution in both schemes has strongly progressive distribution outcomes: poorer households gain relatively more than richer households.

The financial equivalence of the systems allowed us to focus on comparing their impacts on emissions and energy poverty. Providing free green services to everyone in society was associated with significantly higher reductions in emissions and fuel and transport poverty than giving a tax refund to all.

direct investment

Guaranteeing everyone in society access to a base amount of free renewable electricity and/or public transportation would create the need to rapidly scale up renewable power generation and public transportation infrastructure to meet increased demand. In practice, everyone’s electricity consumption would still consist of the differently produced and fed-to-the-grid mix, but the share of renewable electricity would have to increase to meet the baseline amount of renewable electricity per person.

The most effective and fastest way to do this would be for governments to invest directly in expanding renewable power generation and public transport. The higher emissions reductions in the Green Services scenario result from replacing the standard mix of grid electricity with renewable sources and fuels with public transport in the amount covered by the per-person allocation. While the cash tax rebate scenario could theoretically work in a context where renewable power generation and public transport systems are rapidly expanding and replacing their dirtier counterparts, this would be unlikely at current decarbonization rates and without additional government intervention.

Providing a basic amount of renewable electricity and/or public transport free of charge to everyone in society can also make an important contribution to meeting demand. The study applies the ‘low income, high cost’ definition of fuel poverty. Households that use too little energy because they cannot afford it are not included. But it is quantifiable and has been used in various studies and in compiling official statistics.

The study shows that carbon taxes increase fuel and transport poverty by increasing household spending on these necessities. Repaying tax revenues in cash does not take into account the higher expenditure and therefore does little to reduce the increasing fuel and transport poverty caused by CO2 taxes.

Only the alternative option of providing all people in society with basic amounts of renewable electricity and public transport free of charge reduces fuel poverty and transport poverty because it reduces household spending on these essentials. Providing basic energy and transportation for all would also address the energy poverty caused by under-consumption due to lack of affordability.


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Maximizing Uptake

The uptake of free green services could be encouraged in a number of ways – for example, electricity providers could be required not to charge a per-person kilowatt-hour (kWh) subscription fee so consumers don’t have to actively ‘claim’ their allowance. The amount of electricity provided could be expressed in terms of a number of tokens corresponding to a fixed amount of kWh to make the system more understandable, but no real ‘vouchers’ would need to be exchanged.

Maximizing the use of public transport is more complex and difficult, especially in areas that are not already well connected. Expanding service in these areas would be essential to increase uptake, and facilities would need to be made more locally available to reduce the need to travel longer distances into city centres. Everyone in society could have an online public transport account with a prepaid amount that can be accessed when boarding a bus or train. Allocations could be tradable (and/or exchanged for car-sharing and similar schemes) to reduce disadvantage for people in remote areas.

There was no space in the study to discuss ownership and governance of energy and transport infrastructure. But previous research on “universal basic services” and “basic economics” suggest these are important issues that need to be addressed.

One of the most important tasks of the coming years and decades will be the development of a social policy that is able to cope with the climate crisis. Rethinking the way basic services like energy and transport are delivered – to ensure everyone’s needs are met and emissions reduced in a socially just way – must be a core component of the transition to net-zero emissions. Offering a basic set of free green services to everyone in society could be a promising way to contribute to these goals.

Milena Büchs is Associate Professor of Sustainability, Economics and Low Carbon Transitions at the University of Leeds. Her research specializes in sustainable welfare and just transitions.

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