6.6.5 Improved social welfare and poverty alleviation

Improving residential energy efficiency helps households cope with the burden of paying utility bills and helps them afford adequate energy services. One study estimated that an average EU household could save € 200–1000 (US$ 248–1240) in utility costs through cost-effective improvements in energy efficiency (European Commission, 2005). Reducing the economic burden of utility bills is an important co-benefit of energy efficiency for less affluent households. This is especially true in former communist countries and others (e.g., in Asia and Latin America) where energy subsidies have been removed and energy expenditures are a major burden for much of the population (Ürge-Vorsatz et al., 2006). In economies in transition, this situation provides an opportunity to redirect those social programmes aimed at compensating for increasing energy costs towards energy-efficiency efforts. In this way resources can be invested in long-term bill reduction through energy efficiency instead of one-time subsidies to help pay current utility bills (Ürge-Vorsatz and Miladinova, 2005).

Fuel poverty, or the inability to afford basic energy services to meet minimal needs or comfort standards, is also found in even the wealthiest countries. In the UK in 1996, about 20% of all households were estimated to live in fuel poverty. The number of annual excess winter deaths, estimated by the UK Department of Health at around 30 thousand annually between 1997 and 2005, can largely be attributed to inadequate heating (Boardman, 1991; DoH (UK Department of Health), 2000). Improving energy efficiency in these homes is a major component of strategies to eradicate fuel poverty.

In developing countries, energy-efficient household equipment and low-energy building design can contribute to poverty alleviation through minimizing energy expenditures, therefore making more energy services affordable for low-income households (Goldemberg, 2000). Clean and efficient utilization of locally available renewable energy sources reduces or replaces the need for energy and fuel purchases, increasing the access to energy services. Therefore, sustainable development strategies aimed at improving social welfare go hand-in-hand with energy efficiency and renewable energy development.