The triple benefit of an ambitious energy efficiency programme
This post is by Will Straw, associate director for climate change, energy and transport at IPPR. It is taken from the collection of essays, published today by Green Alliance, Green social democracy: better homes in better places. This pamphlet, alongside similar collections on ‘Green liberalism’ and ‘Green conservatism’ (to be published next week), are part of our Green Roots programme, aiming to stimulate green thinking within the three dominant political traditions in the UK. A version of this piece has been published on Labour List.
Britain’s communities are facing three big challenges: a living standards crisis, a jobs crisis and a climate crisis. Improving Britain’s homes to make them more energy efficient is a significant part of the answer to all three but the government’s market-driven approach looks inadequate. Instead, greater shared responsibility between government, the market and civil society should be encouraged to address this triple crunch. So what does the British public think about these three problems and is there a solution for all three?
It is often asserted that the 2015 election will be the ‘living standards’ election. In May, earnings growth fell to its lowest level in four years. Inflation at 2.8 per cent is eroding disposable income and families’ purchasing power. Some prices stand out for consumers with energy becoming the country’s number one concern. According to the Committee on Climate Change, nine out of ten households are now worried about rising energy bills.
Rising bills and unemployment are the top concerns
It is not hard to understand why so many are concerned by energy prices when, from 2004 to 2011, dual fuel bills rose from £610 per year to £970. It should be noted that over 80 per cent of the rise was due to wholesale gas prices and supplier costs and profit, with just £70 due to low carbon policies. But the main point that should concern government is that bills are expected to continue rising, meaning that family budgets will be squeezed further. Energy efficiency, ie helping households to retain comfort levels while reducing heat and electricity usage, is therefore critical to tackling this challenge. It’s the easy win politicians are always hunting for.
Alongside concerns about family finances, MORI polling shows that one third of people see unemployment as one of the biggest issues facing the UK, one of the highest levels since the recession started in 2008. After falling for a number of months, unemployment rose and employment fell in the first quarter of this year. As of May, there were still 2.56 million people out of work including 979,000 aged 16 to 24 and 900,000 who have been out of work for more than a year.
The simple fact of the matter is that energy efficiency programmes are the most effective ways of stimulating the economy. They are a labour intensive form of infrastructure expansion. Indeed, energy efficiency beats Labour’s preferred approach of cutting VAT, the Tories’ favoured cuts to fuel duty, and road building projects beloved by industry groups. If you want to create jobs and growth, energy efficiency is the best way forward.
The consequences of climate change are being felt
Although climate change is rarely cited as a major concern by the public, its consequences are already affecting Britain’s communities. Rising food prices are contributing to the squeezed living standards. Poor weather in 2012 led to a 14 per cent decrease in yields for both wheat and oilseed rape. In April, Channel 4 reported that the wheat harvest was set to be a third lower than normal after a wet winter and freezing start to the year.
Flooding is also a concern. In 2009, around one in six residential and commercial properties were at risk of flooding. Within that group, there are 490,000 properties which face a significant risk (defined as a 1 in 75 chance of flooding in a single year). Because of climate change, the Environment Agency expects that figure to rise by 350,000, or 71 per cent, by 2035. This is having a predictable impact on the price of home insurance.
Once again, energy efficiency is a significant part of the answer to these issues. To reduce harmful carbon emissions from our power sector we need both to replace dirty coal and gas with clean power and reduce the amount of energy we use. Improving appliance efficiency can bring down the amount of demand for electricity at a fraction of the cost of trying to build renewables, nuclear or carbon capture and storage. DECC estimates that the right investment in energy efficiency by 2020 could prevent 22 new power stations being built.
How to make energy efficiency work
The government’s policies are not hitting the mark. The flagship Green Deal programme, which provides loans for energy efficiency improvements, has only been taken up by a handful of households. A recent report by the Energy and Climate Change select committee identified a number of reasons why progress had been so sluggish including the high cost of finance, the hassle of building works, and issues in the private rented sector as tenants fail to gain consent from their landlords.
IPPR has concluded that the Energy Company Obligation (ECO), which directly funds energy efficiency improvements for poor households, could result in high costs and is woefully insufficient for tackling fuel poverty.
Guaranteeing the triple benefits of energy efficiency to living standards, jobs, and the climate will not be easy, but there are a number of ideas that look ripe for adoption.
First, to address problems in the private rented sector, mandatory standards for landlords should be brought forward from 2018. The least efficient properties are more than four times as common in the private rented sector. Families living in these properties, many of whom are in fuel poverty, could save £488 per year if standards were raised from Band F or G to Band E. Giving landlords some advance warning makes sense but the current roll out is taking far too long.
Second, the ECO can be improved through the piloting of a ‘low income, low efficiency area’ (LILEA) approach. Instead of targeting resources on a house by house basis, the LILEA approach targets groups of houses in geographical locations likely to have high levels of fuel poverty. Some more affluent households would receive support but the approach would save money and increase take-up overall. Doing whole streets at a time would introduce economies of scale by bringing down costs like scaffolding and remove the stigma associated with being the only house in an area to undertake efficiency measures. Local authorities should also be involved in the programme since they have better working knowledge of the best areas to target.
Finally, a green new deal should form the backbone of any jobs guarantee programme. IPPR has called for £2 billion to be used to subsidise the employment of young, long term unemployed people in the energy efficiency sector. Using Cambridge Econometrics’ model, this could create around 54,000 jobs and save every treated household around £235.
By bringing together national regulation, local government, civil society and the private sector, a more ambitious programme is possible that will protect the poorest households from future costs while stimulating more activity: ‘predistribution’, if you will, without the wonkery.