Monday, March 30, 2009

Energy Poverty

A growing number of families are threatened by a relatively ambiguous, but long-standing issue. While not easily categorized; a commonly-used, but misleading term for this condition is fuel (or energy) poverty which refers to the challenge some households face accessing adequate, affordable energy.

Energy poverty is linked to a number of issues like unemployment, inflation, and rising energy and utility prices. It can also be tied to building standards and codes which have a direct correlation to home energy efficiency. Subsidized energy pricing does not encourage efficiency and conservation. Government subsidies appear to discourage responsible energy consumption and use of efficient products, which in turn skews the true market price of natural gas and electricity through the simple laws of supply and demand. Energy is a tradable commodity and subject to market and other external forces which regulate price.

Energy prices are forecast to gradually rise faster than household income creating the potential for this issue to grow to epidemic levels. A free energy market is a potential cause and solution to the rise (and fall) of energy poverty.

In North America, energy poverty is mainly addressed by government through inconsistent multi-jurisdictional public policy. The framework has proved ineffective in identifying and dealing with the root causes of energy poverty poverty itself. In the US, the federal and some state governments provide relief through the welfare system. The previous Bush Administration released $5.1 billion in fuel assistance to the states last fall. Approximately 5.8 million American households received some form of assistance last winter with about 2 million more families expected to receive heating assistance this year.

In Canada, most provinces offer a mix of energy subsidies such as rebates and fixed credits. In Ontario, both public and private initiatives are available. The Ontario Power Authority has been mandated by the provincial government to eliminate the plight of the fuel poor within 10 years, while the charitable Share the Warmth program has provided over $2 million in assistance to qualified households. Alberta, however, has just ended its energy subsidy program on the grounds that gas prices are now so low that the price trigger is unlikely to be met in the foreseeable future.

Subsidized Energy and Energy Poverty

Countruies which subsidize wind and solar energy and mandate the portion of renewables which must be in the energy mix have found that the net impact of these two measures is to increase energy costs. Ironically, supporting renewables increases energy poverty.

In addition, supporting renewables comes at a taxation cost – someone has to pay for the subsidies which the rent seekers secure for wind and solar energy. This generally results in higher taxation which, in addition to higher energy costs, increases energy poverty.

As Spain has found, a significant renewable energy commitment also leads to job displacement. For every new green job between 2 and 3.5 jobs elsewhere in the economy are displaced: renewable energy leads to job loss under certain conditions.

Poverty in the Developed World is Deliberate

The emergence of energy poverty as a developed world problem as a result of green energy policies is a deliberate strategy of environmentalists to change the nature of the economies of the developed world. As we can see from UN documents prepared for the Copenhagen summit in December, energy poverty will increase as a result of the policies proposed. Additional subsidies, taxes and regulation together with cap and trade will make conventional energy on which the global economy will rely for a considerable time much more expensive.

The full socio-economic impact of environmentally focused policies is incomplete, but the consequences of actions already taken are clear. Bio-fuel standards increased costs of living in the poorest countries, renewable energy will increase energy poverty globally.