Magazine article Impact

Greenhouse Emissions Targets: Policy Responses and Their Impact on Low Income Households

Magazine article Impact

Greenhouse Emissions Targets: Policy Responses and Their Impact on Low Income Households

Article excerpt

The Federal Government's proposed carbon trading scheme will consign households to an annual average electricity price increase of $200, creating a significant impact on those whose incomes are hovering around or below the poverty line.

On the face of it, the increase may not appear substantial, but for low-income households, in particular pension and benefit recipients, this is equivalent to a week's income.

It also fails to acknowledge that not only do these people use less energy than the average household, they also, as a proportion of their weekly household spending, spend almost double the amount compared with the average household.

This highlights the disproportionate impact such a price increase would have on low-income households, in effect penalising them for energy consumption levels that are below the average.

Recent literature on domestic electricity demand suggests the price increases associated with the trading scheme will only nominally reduce electricity consumption.

The trading scheme also fails to deal with structural issues faced by many low-income households. For example, many who are home owners or struggling to pay mortgages do not have the money to invest in energy-efficient appliances. And many public or private tenants have no control over appliances such as heaters and stoves, giving little scope for electricity savings.

The scheme also provides no help for households that have little or no access to alternative fuels such as natural gas.

The Federal Government should ensure that social equity principles complement the environmental outcomes by building equity principles into tariff structures.

There are a range of pricing models which can be applied to domestic consumption, and each has particular impacts on those on low incomes, as well as differing potential to act as an incentive to reduce energy consumption across all households. Tariffs which are higher during daytimes, for example, are likely to impact more on people, including those not working, who are more likely to be at home during daylight hours.

Other tariffs can effectively increase the cost per unit of energy as more is consumed, effectively 'penalising' high users while protecting more efficient consumers and those on lower incomes who tend to consume less.

The St Vincent de Paul Society believes that the potential social impact of the scheme can be eased if the Government implements electricity consumption pricing principles which protect low-income, low-volume households and support and reward those who conserve energy. …

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