Energy crisis could worsen poverty for millions of Europeans

Electricity consumption saw a 6% increase last year, according to a survey published on 12 January by Finnish Energy ( T). [Gerd Altmann / Pixabay]

This article is part of our special report Energy poverty.

Energy prices have skyrocketed in the past months, increasing the concern that millions of Europeans will have to choose between paying their bills and putting food on the table this winter.

“Unfortunately, the vulnerable will be made to pay the price for the volatility of our fossil fuel energy system,” said Martha Myers from Friends of the Earth, an environmental NGO.

“It is a tragedy that in one of the richest continents in the world, one in four European households and more this winter are having to make the decision between heating their homes and having food on the table,” she told EURACTIV.

Around 31 million Europeans were living in energy poverty and were unable to keep their homes adequately warm, according to Eurostat figures cited by the European Commission in its 2021 State of the Energy Union report.

However, many say that number may be underestimated because there is no common definition of energy poverty across Europe, which makes it difficult to evaluate the extent of the problem.

For instance, the Commission’s Joint Research Centre calculated in 2019 that 50 million people were living in energy poverty – almost 20 million more than the EU’s latest estimates.

Myers warned this number could rise to 80 million because of the current energy price crunch combined with the impact of the COVID crisis.

The European Commission has acknowledged the risk of rising energy poverty in its recent “toolbox” of proposals to assist EU member states in dealing with high energy prices.

“While the recent price hikes affect everyone, the energy poor and the low and lower middle-income households are most impacted because they spend significantly higher shares of their incomes on energy,” the EU executive said.

Although the rate of energy poverty varies from country to country, researchers say the ongoing energy price hike is made worse by the COVID-19 crisis, which has pushed some households closer to the brink.

“What we could expect is worsening existing energy poverty, more than people actually falling into energy poverty – at least that’s from the data that we have in France,” said Camille Defard, a research fellow for EU energy policy at the Jacques Delors Institute.

“We’ve seen that there are not more poor people, but the poorest are poorer due to the COVID-19 crisis. I think we could expect potentially similar results, due to the energy crisis,” she told EURCTIV.

Already before the pandemic, one in five people in the EU were at risk of poverty and social exclusion – or around 110 million people, according to the President of the European Economic and Social Committee (EESC).

Energy poverty 'likely to increase' once bank moratoriums are lifted

The President of the European Economic and Social Committee (EESC) on Tuesday (20 April) called for “coordinated action” across the European Union to tackle energy poverty, warning that poverty is “likely” to increase once bank moratoriums are lifted.

Papering over the cracks

Across Europe, countries have rolled out measures to alleviate the impact of energy prices that crept up over the summer and grew to an international crisis by mid-autumn.

In the short term, solutions include temporary tax reductions and lump-sum payments to low-income households to help them pay their energy bills. Spain, France, Italy, and Greece have all brought in measures like these to help vulnerable households.

To guide national governments, the European Commission put forward a “toolbox” of measures in October that countries can use to tackle the crisis. The toolbox includes short term and long term solutions to alleviate pressure on households and small businesses “without harming the EU internal energy market or the green transition in the medium-term”.

EU member states also have access to a treasure chest of €10.8 billion in additional revenues generated from the EU’s emissions trading scheme that were accrued since the start of the year, the Commission pointed out.

“There is no limit to how much of this can be used to protect vulnerable households,” said the EU’s energy commissioner, Kadri Simson.

EU outlines short and long-term answer to global energy price surge

The European Commission unveiled on Wednesday (13 October) a “toolbox” of measures  EU countries will be able to draw from when responding to rising energy prices in the short term, while pointing to an upcoming gas market reform for measures to be considered in the long term.

A permanent crisis?

In the long-term, the solution put forward by Brussels is to decrease reliance on imported fossil fuels by ramping up energy savings and boosting the amount of home-grown renewables in Europe’s energy mix.

“The only long-term remedy against demand shocks and price volatility is a transition to a green and more efficient energy system based on mostly local sources,” Simson said, adding that wind and solar power “have continued to provide the most affordable electricity on the market throughout the crisis”.

However, the energy transition will take time, and some are warning that volatility on energy markets is likely to remain high because the green transition will create more uncertainty for oil and gas.

“There will be a long-term increase in energy prices because of the environmental transition,” said French economy minister Bruno le Maire, who predicted that this will be “one of the major political issues for the coming years”.

Claude Turmes, the energy minister of Luxembourg, used similar terms during a recent press briefing in Brussels. “The question is whether there will be more volatility on energy markets on the way to climate neutrality in the long term,” he told journalists. “And that is something which is not completely surprising, because fossil investments are less secure in the mid to long term and so safety margins in these markets are probably smaller.”

Consumer groups point out that the energy crunch has exposed some of the contradictions of the green transition: while ditching imported oil and gas has become even more urgent, protecting consumers from price fluctuations will become increasingly necessary during the transition.

“What’s happening now is a bit of an eye opener when it comes to the green transition,” says Els Bruggeman, from Euroconsumers, an organisation with members in Belgium, Italy, Portugal and Spain.

“Some argue this situation won’t last beyond Spring 2022. But probably it will happen again, especially when you consider the green transition. We will need much more flexibility in terms of gas back-up in case of shortages of renewable energy. And with more renewables coming into the electricity grid, it is not excluded this situation could happen again,” she said.

“More than ever, it has become clear that the green transition must be a just transition. And if you don’t have everyone on board, including consumers, it’s not going to work,” Bruggeman told EURACTIV in an interview.

The Green Brief: Fossil fuel subsidies are back (and they’re here to stay)

With the ongoing surge in energy prices, EU governments have scrambled to implement emergency measures to protect vulnerable consumers. Yet in doing so, they’re indirectly subsidising fossil fuels and undermining the green transition just weeks before the UN climate summit opens in Glasgow.

Ending energy poverty globally

Energy poverty is not just an issue in Europe. On a global level, one of the United Nations’ sustainable development goals is to ensure access to “affordable, reliable, sustainable and modern energy for all,” including significantly increasing the amount of renewables in the world’s energy mix.

Over the last decade, there has been significant progress, with the number of people without access to electricity dropping from 1.2 billion to 759 million. The share of renewables has also increased from 16.3% to 17.3%.

But there is still a lot to be done to achieve a clean energy mix for the global population.

“An energy revolution based on renewables and energy efficiency is urgently needed not just to accelerate economic progress and development, but also to slash emissions that are rapidly warming our planet,” according to the UN’s report on energy access.

The report warns that the energy sector is still dominated by fossil fuels, which account for 73% of human-caused greenhouse gas emissions. These must be halved by 2030 to avoid increasing the frequency of extreme weather, population displacement and food and water insecurity, it says.

“As governments start to define a pathway out of the COVID-19 crisis, we must now ensure that all countries have the chance to be part of an energy transition that seizes the opportunity to significantly improve the wellbeing of people, and planet,” the UN report reads.

[Edited by Frédéric Simon]

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