22 October 2021

Can we reach net zero without throwing the poor under the (electric) bus?

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This week marked a turning point in our journey to Net Zero. For the first time, the debate focused on how we’ll get there, with little noise about whether it’s the right destination. There was little discussion, however, about one of the trickiest challenges: how we ensure green policies alleviate hardship rather than making the lives of people on low incomes even harder.

The UK can fairly claim to be a leader in action on climate change. Between 1990 and 2019, our greenhouse gas emissions fell by 44%, compared to only 5% for the G7 overall. However, many policies to achieve this have been strikingly regressive.

The Climate Change Levy on fuel bills, for instance, hits poorest households hardest because energy bills take up proportionately a much larger part of their income than those on higher incomes. Some of the funds raised by the levy pay for schemes helping people on low incomes to improve their homes’ energy efficiency, such as the Carbon Savings Communities and Affordable Warmth schemes. But 2018 research showed that the poorest 10% of households paid £271 million towards the levy, with the costs of these two schemes coming to £220 million a year.

The richest tenth of the population have a carbon footprint more than three times as large as the poorest tenth. Poorer households consume less, but their spending is more carbon-intensive (because of the high share of their income which goes on things like energy bills).

That does not we should halt or slow the transition to Net Zero, however. On the contrary, the poor contribute much less to climate change but are more exposed to its negative consequences. They suffer more from air pollution. They disproportionately live in places likely to be flooded, without insurance to cover the costs. Many live in houses they struggle to heat, leaving them exposed to cold and damp. 

Indeed, the Treasury’s Net Zero Review acknowledges that higher income households contribute more to climate change but those on lower incomes are more exposed to the additional costs of transition. However, it argues that the variation within income groups means public spending should be targeted at ‘specific decarbonisation measures for low-income households’ rather than at broader measures through the tax or social security systems. How well will this approach work? 

Transport is the biggest contributor to the UK’s greenhouse gas emissions, with next to no progress in reducing emissions since 1990. So far the Government’s response has largely focused on increasing adoption of electric cars. It recognises this will advantage those who can afford a new, expensive vehicle and to install charging points. The Net Zero Review acknowledges this means policies increasing the cost of dirtier cars will become more regressive, but there is no mention of expanding access to public transport, despite the fact that many people on low incomes are already shut out of opportunities because of poor transport links.

Decarbonising our homes is another key plank of the Net Zero agenda. The Heat and Buildings Strategy sets out a strategy based primarily around moving from gas boilers to heat pumps and increasing home insulation. The majority of those on low incomes rent either from local authorities and housing associations or in the private rented sector. So it’s encouraging to see action to insulate these homes, especially as the least well off are increasingly living in the least energy-efficient homes (a change from a decade ago). The Conservative manifesto promised about £1 billion to insulate English social housing between 2022 and 2025. The Government has announced just under that so far, but even if they hit the manifesto target it will be well short of the £6bn the Resolution Foundation estimates is required.

The Strategy sets out welcome targets for private landlords to improve rented homes, though whether those will actually be enforced is another matter altogether. And if landlords do decide to upgrade their properties, there’s a risk they will have to evict tenants in order to do so, and of rents rising even more as landlords pass on the cost of upgrades. Nor does the Heat and Buildings Strategy have much to offer low income home-owners. It relies on tools such as ‘green mortgages’ to lend home-owners the money to upgrade, but the prospect of taking on more debt is unlikely to appeal to those already struggling to pay the bills.

Food production and consumption has been little discussed this week, but 9% of the UK’s greenhouse gas emissions come from agriculture and the food system is the single largest cause of declining biodiversity and species loss in the UK. The Joseph Rowntree Foundation, IPPR and the Zero Carbon Campaign recently held workshops bringing together climate change and anti-poverty groups to discuss these issues. Solutions to the food challenge proved especially hard to find. Although much of the transition to Net Zero should eventually mean lower costs for consumers, we may need to accept higher prices to support a more environmentally sustainable food system.

Finally, jobs and incomes. Transition to Net Zero should generate new green, high-value jobs. The Net Zero Review suggests that innovation in 12 low carbon sectors could contribute £53 billion to the UK’s economy by 2050.  But low-income workers are disproportionately in ‘high carbon density occupations’, meaning they may need support to retrain and move into new low-carbon jobs. Given the geographical concentration of those industries, failing to help workers through the transition will undermine the Government’s much-trumpeted ‘Levelling Up’ ambitions. It is made all the more challenging by the collapse in adult education funding, which has halved in the last decade, with the numbers participating plummeting and employers spending less on training.

It’s reasonable for the Treasury to want Net Zero policies specifically targeting decarbonisation. However, it will only work if is coupled with a credible living standards strategy, which has so far been sorely lacking. The recent decision to cut Universal Credit pulls millions into deeper hardship and debt, while policies such as the Warm Homes Discount exclude many low-income working age households. For all the talk about moving to a high-wage economy, we have seen little action to improve job quality.

Next week’s Budget and Spending Review will show how serious the Government is about improving living standards and fulfilling their promises to the low-income voters who put them in power. Ducking the challenge will hold back progress towards Net Zero, as well as driving up poverty.

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Helen Barnard is Associate Director of the Joseph Rowntree Foundation.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.