THE FUTURE OF EUROPEAN ENERGY EFFICIENCY POLICIES: OPTIONS AND UPDATES

BY Yuna SELLAMI

How to encourage energy poor households to renovate their homes?

Energy poverty is a growing and complex issue that affects a large part of the global population. It can be defined as the inability of households or individuals to access affordable and sufficient energy services necessary for basic needs, such as lighting, heating, cooking, and other household energy requirements (Santamouris, 2007; Poortinga, 2018; European Commission, 2023). According to Eurostat (2021), almost 8% of the European Union population was unable to afford proper heating in their homes in 2020. Improving the energy efficiency of residential buildings can yield favorable outcomes for low-income households, such as mitigating energy poverty by enhancing living conditions and decreasing energy costs (Collins, 2022; Pillai, 2022). However, despite the potential benefits, economically profitable investments in energy-efficient building renovations are not always adopted (Chandler et al., 2009). To achieve current energy efficiency standards in residential building stock, household-level changes are necessary, but it is not always that simple for low-income households suffering from energy poverty. Renovating their homes is often not a priority as poorer households may have to sacrifice necessities such as food or medicine to pay high energy bills (Anderson et al., 2010; Raissi and Reames, 2020). Therefore, drawing from the research work of John Curtis, Miguel Tovar Reaños, and Arya Pillai from the Economic and Social Research Institute of Ireland, this paper aims to understand the reasons behind the reluctance of energy poor households to renovate their dwellings and therefore propose solutions to facilitate such renovations. To answer the question, the paper will be structured as follows: firstly, a brief contextualization of the barriers to energy efficiency will be presented. Secondly, the case of Ireland and its retrofit schemes will be used as an illustrative example to demonstrate the importance of informational and behavioral barriers. Thirdly, the concept of shame and stigmatization will be introduced as a relatively underexplored factor that may contribute to the limited motivation of low-income households to undertake home renovations. Fourthly, recommendations will be presented, followed by the conclusion and limitations of the study.

Exploring energy-efficiency retrofit barriers for low-income households

The achievement of potential energy efficiency savings of 10% to 25% for low-income households is hindered by the absence of targeted policies that address barriers to energy efficiency (Fraunhofer ISI, 2014). Previous research has identified two main obstacles to energy efficiency adoption among low-income households: economic and institutional barriers (Cattaneo, 2018; Gerarden et al., 2017; Schleich et al., 2016). Together, these challenges create an “energy-efficiency gap,” referring to the difference between the expected benefits of policies and their actual outcomes (Bagaini et al., 2020). In their survey of the building and transportation sectors, Bagaini et al. (2020) found that institutional and financial barriers are the most significant obstacle to the implementation of energy efficiency solutions. To address this, many European governments offer financial incentives such as direct subsidies or tax credits to help low-income households adopt energy-saving technologies and alleviate the upfront costs of energy-efficient investments (Ameli & Brandt, 2014; Kyprianou et al., 2019). However, while financial and institutional barriers are a significant impediment to investment in energy-efficient home renovation, they do not fully explain the energy efficiency gap. Behavioral and informational barriers also play a critical role in household decision-making regarding energy efficiency retrofits (Cattaneo, 2018; Gerarden et al., 2017; Schleich et al., 2016). Amoruso et al. (2018) have noted that inadequate information about the economic and technological advantages of energy-efficient technologies, combined with difficulties in accessing information about energy use (Ameli & Brandt, 2014), can negatively impact investment decisions. This phenomenon can be attributed to the rationality of households. As limited cognitive capacity and a reluctance to expend effort in collecting and processing information about investment costs, may lead to the use of simplifying heuristics in information processing, resulting in underinvestment in home renovation (Streimikiene, 2020).

Understanding abandoned retrofit grant applications in Ireland

In Ireland, scholars (Pillar et al., 2021; Collins & Curtis, 2017) have conducted research to explore the underlying reasons behind the limited uptake of energy efficiency retrofit applications among low-income households. To contextualize this issue, in 2009, the Sustainable Energy Authority of Ireland (SEAI) implemented the Better Energy Homes (BEH) and Better Energy Warmer Homes (BEWH) programs, which offer free retrofits to low-income homeowners for improving home energy efficiency through the installation of energy-saving appliances and upgrades (DCCAE, 2017). It has been noted that households were aware and motivated to apply for the free retrofit scheme upon submitting their application. Nevertheless, despite overcoming financial, institutional, and informational barriers, research by Pillar et al. (2021) and Collins & Curtis (2017) has shown that the BEWH and BEH schemes experienced abandonment rates of 9% and 15%, respectively. The scholars have attributed the abandonment rate of the retrofit programs to two main reasons. The first is the discrepancy between planned and unplanned retrofit measures, as unplanned retrofits have a higher probability of abandonment. Households perceive these unplanned retrofits to have lower potential benefits. This finding is consistent with existing literature on informational and behavioral barriers (Chen et al., 2017; Day & Gunderson, 2015), suggesting that early awareness of the environmental and economic advantages of energy efficiency retrofits could encourage households to plan their home renovation projects in advance, and thus, reduce the likelihood of abandoning their application. Secondly, seasonality was identified as a contributing factor to application abandonment, with households more likely to withdraw their application during winter and spring than in other seasons. In summary, the case study of Ireland highlights that lack of information at an early stage about the benefits of retrofitting activities and seasonality are significant obstacles to the participation of low-income households in dwelling renovation programs (Pillar et al., 2021). Additionally, Raissi and Reames (2020) found that misunderstanding eligibility criteria and lengthy participation processes can also reduce engagement among poor household. These findings suggest that addressing financial and institutional barriers alone is insufficient to encourage investment in energy efficiency. Bounded rationality, decision-making heuristics, and informational challenges are critical factors that must be considered in energy policies but are difficult to translate into actionable measures (Schleich et al., 2016; Ameli & Brandt, 2014). Interestingly, the literature on energy efficiency barriers has overlooked the potential impact of shame and stigma associated with poverty.

Addressing the role of shame and stigmatization in Energy Poverty

Little attention has been given to the role of shame experienced by low-income households in relation to the development and implementation of energy poverty policies. Shame is a self-conscious emotion that involves a sense of worthlessness and self-evaluation, while stigma is the mechanism through which shame is produced (Roelen, 2020; Tangney et al., 2007). The shame and stigma associated with energy poverty appear to be positively correlated. Financial difficulties, such as the inability to pay energy bills, is identified as the most prominent factor inducing feelings of shame among low-income households (Pellicer-Sifres et al., 2021). For instance, Walker et al. (2013) found that low-income households often avoid discussing financial difficulties related to energy costs with people outside the household to avoid potential stigmatization. The stigma and shame associated with energy poverty can create an additional barrier for households seeking assistance or government benefits to renovate their homes to meet current energy efficiency standards. Low-income households may view these procedures as demeaning and stigmatizing, further hindering their ability to address their energy needs. This highlights the importance of addressing not only financial and informational barriers but also the social and psychological dimensions of energy poverty to promote energy-efficient home renovations.

Empowering low-income households for home renovation: recommendations

Besides the main financial, institutional, informational, and behavioral impediments, the primary conclusion of this research is the importance of confronting the notion of shame and social stigma that are associated with energy poverty to encourage low-income households to undertake home renovation.

Shame and stigmatization are not a unified phenomenon, but rather linked to emotions experienced by low-income households, which may be expressed differently across cultures, values, beliefs, and practices (Pattison, 2000). To address energy poverty, the choice of terminology is critical. While “encouraging” suggests support and guidance, “empowering” implies the provision of power and confidence (Oxford Dictionary of English, 2023). Both encouraging and empowering are essential concepts in improving energy efficiency in low-income housing. However, in the context of shame and stigmatization related to energy poverty, the use of the term “empowerment” may be more appropriate and less stigmatizing, as it conveys a sense of providing tools, resources, and confidence to act. Therefore, this initial question of this paper should be reformulated to explore how to empower low-income households to renovate their homes.

Low-income households that experience shame and stigmatization may feel isolated and tend to keep such experiences within the household, as evidenced by research (Walker et al., 2013). However, it is possible that other households in their community share similar experiences. Therefore, community engagement and presence are critical components in empowering low-income households, as noted by Hoody et al. (2021). When implementing programs like BEH or BEHW, it is essential to involve the community in the program and enable them to drive the project, rather than simply introducing the program to the community. In the case of a specific community, those in charge of the program should have a deeper understanding of the background, needs, and aspirations of the community including those related to shame and stigmatization. This knowledge will enable them to develop community-specific energy poverty programs that are better suited to addressing the unique challenges face by the community.

To enhance community engagement, trust in the program and the government is paramount. Collins et al. (2017) suggest that involving a third-party mediator to facilitate the private application process between low-income households, contractors, and the government can promote community participation. As noted by Hoody et al. (2021), this mediator should assume the role of a “peer-to-peer energy educator” who can offer guidance on energy-saving techniques and assist with the application process. The authors emphasize the importance of the mediator coming from the community to foster long-term trust and establish comfortable relationships among low-income households, potentially mitigating the feelings of shame and stigmatization.

Conclusion & limitation

In conclusion, this study has highlighted the complex and various challenges faced by low-income households seeking to make energy-efficient home renovations. Financial, institutional, informational, and behavioral barriers are interrelated and require a comprehensive approach. Energy poverty is not only an economic or social condition, but also a psychological one that affects the self-esteem and self-confidence of individuals who may experience feelings of shame and stigmatization. Consequently, these factors may explain the limited participation of low-income households in applying for government-provided benefits for dwelling renovation. To address the initial question of how to encourage energy-poor households to renovate their homes, energy poverty policies should focus on empowering low-income households, fostering community engagement, and utilizing peer-to-peer educators. Nevertheless, more extensive research is required to support these claims, as the literature offers limited methodology and data to corroborate them. Nonetheless, these insights signal that this is an area of importance that demands further attention from both researchers and policymakers.

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