A Multidimensional Approach to Measuring Fuel Poverty.

Author:Charlier, Dorothee
Position:Report
 
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  1. INTRODUCTION

    Fuel poverty occurs when a household is unable to afford the most basic amount of energy for adequate heating, cooking, lighting, and use of appliances in the home. In 2011, 9.8% of households in the EU27 countries and 15.8% of households in the 12 new member states could not afford to heat their homes adequately (European University Institute, 2011). Moreover, 8.8% of EU27 households and 17.1% of households in the 12 new member states were in arrears on their utility bills (1) (European University Institute, 2011), so between 50 million and 125 million people in Europe are estimated to be fuel poor which represents respectively between 10% and 25% of European population (Bird et al., 2010; European Fuel Poverty and Energy Efficiency, 2007, 2011). Thus, fuel poverty is an increasingly serious problem across Europe (2) (Birol, 2007; Bouzarovski et al., 2012; Brunner et al., 2012) and requires the intervention of policymakers. Indeed, ONPE (2016) estimates the number of fuel-poor households in France to be 3.8 million (5,8% of population).

    In particular, (i) corrective measures have been implemented which aim to help fuel-poor households pay their energy bills, and (ii) preventive policies have also been introduced, which focus more on improving residential energy efficiency. Debates about the effectiveness of these measures have ensued for several reasons; mainly because energy retrofit renovations have often been undertaken by wealthier households (Charlier et al., 2018; Vilches et al., 2017). Thus, despite these measures, given the expected increase in the cost of energy, some could find it difficult or even impossible to satisfy their energy needs. The relationship between subjective well-being and the affordability for households of electricity, heating oil and natural gas has been already demonstrated (Welsh and Bierman, 2017). As a prerequisite to discussions about the effectiveness of different measures to fight fuel poverty, debates have often focused on the need to reliably identify fuel-poor households and create a detailed profile of such households. In fact, the multidimensionality of fuel poverty makes it difficult to achieve this.

    Fuel poverty has generally been treated as a monetary poverty problem. At European Union level, there is no common definition or standardized indicator for assessing fuel poverty. While there is a large body of literature on measuring poverty (Phradan and Ravallion, 1998; Ravallion, 1998; Ravallion and Bedani, 1994) consensus has not yet been reached on the related methodological and conceptual issues. Only four countries have defined the concept of poverty and energy poverty: The United Kingdom, Ireland, France and Slovakia (Host et al., 2014). However, households affected by fuel poverty are not always the same as those affected by monetary problems, even if the two phenomena are inextricably linked, representing an aspect of multidimensional poverty (Legendre and Ricci, 2015).

    In this context, we suggest that a more careful and systematic understanding can be developed through a multidimensional approach to the relationship between monetary poverty, residential energy efficiency of buildings, and heating restrictions. Our objective in this paper is not to challenge existing measures of fuel poverty, but provide new ways to better identify those who suffer the most from fuel poverty in order to optimize policy. We argue this is needed to better identify the connection between energy use and well-being and therefore deepen understanding of energy poverty or energy precarity.

    Current definitions of fuel poverty underscore the need to consider its multiple dimensions. Depending on the country, the definition of fuel poverty might include indoor temperature, cooling expenditures, damp walls and/or floors, lack of central heating, and rotted window frames.

    Moreover, the literature has begun to highlight the need for a theoretical framework for fuel poverty similar to Sen's work on poverty (Sen, 1979). Over the past 20 years, many involved in energy issues have grappled with the concept of energy poverty (Foster et al., 2000; Gonzalez-Eguino, 2015; Krugmann and Goldemberg, 1983; Pachauri and Spreng, 2003), and several approaches have been used to define and measure it (Department of International Development, 2002). These methods often define a minimum level of physical energy expenditures above which households can be considered non-poor. This level is based on a basket of goods and services for meeting direct energy needs (e.g. heating, lighting and cooking) and the energy embodied in additional goods and services that households use. However, a problem arises in assessing the minimum level of energy required for basic needs, which can be different among countries and climates. Thus, consensus on a common definition and harmonizing the use of fuel poverty indicators is still needed in developed countries. Indeed, it is difficult to identify all the dimensions of fuel poverty, notably self-imposed heating restrictions, and the usual definitions result in an amalgamation of fuel poverty characteristics (Charlier et al., 2015), such that policymakers have difficulty identifying the fuel poor. Households around a certain threshold may be excluded from the definition of fuel poverty, yet still be vulnerable.

    Within the same country, regional differences in climate, different socioeconomic characteristics (cost of living), and cultural factors necessarily influence the phenomenon of fuel poverty. Existing monetary indicators are not sufficient for a single, satisfactory conceptual framework that can make comparisons and capture inequalities from the local to the national to the global level to reveal more about variations between developed countries. On the other hand, assessing fuel poverty as a component of overall precarity and viewing it as connected to other forms of poverty appears essential to designing effective solutions. A convincing assessment of energy insecurity requires a broad and above all non-binary approach. The object of our research is to capture the phenomenon as a whole while retaining the elements to be considered, as well as the objectives created by binary measurement tools. We achieve this by controlling for specific regions. The results of our work will enable policymakers to adopt appropriate fuel poverty control strategies

    based on the distribution of the phenomenon in the population. Thus, the purpose of this paper is to measure poverty in three steps according to Sen's work (1979): (i) combining poverty characteristics into an aggregate measure involving a fuel poverty index (FPI), (ii) identification and comparison of poor people according to existing and new definitions and (iii) testing the robustness of the fuel poverty composite indicator. Our results show that the usual measures amalgamate the characteristics of fuel poverty, while the multidimensional approach enables us to consider all the components of fuel poverty: objective measures (monetary poverty, heating privation, and residential energy efficiency) as well as subjective measures such as thermal discomfort. Moreover, the fuel poverty composite indicator continues to be around 0.107 even when the robustness of the fuel poverty composite indicator is assessed in terms of the mechanism for calculating single indicators, the normalization scheme, and the removal of extreme value data. This new index provides a robust scale of energy precarity, and consequently a more precise way of capturing different degrees of fuel vulnerability. Thus, we contribute to the literature by proposing a global and quantified approach to energy poverty in a developed country by means of a multidimensional index.

    The remainder of the paper is organized as follows. In section 2.1, a review of the literature on standard measures of fuel poverty is presented. Then, in section 2.2, we introduce our multidimensional approach and fuel poverty index. In section 3, we present the data. Household profiles are examined according to the different definitions of fuel poverty in section 4.1, and we demonstrate the robustness of the multidimensional approach in sections 4.2 and 4.3. Section 5 concludes.

  2. MEASURING FUEL POVERTY IN FRANCE

    2.1. Standard measures of fuel poverty

    From a general point of view, a household is considered to be fuel poor when it occupies an energy-inefficient dwelling and is unable to pay the bills for heating the home at an appropriate level. Thus, fuel poverty refers to a multidimensional concept that includes three phenomena: the socioeconomic situation of the household according to income level, the characteristics of the dwelling including energy efficiency, and the energy access conditions generally reflected in the price of energy (Devaliere, 2007; European Fuel Poverty and Energy Efficiency, 2006; Palmer et al., 2008). One of the first measures of fuel poverty, the energy income ratio or the 10% approach, was proposed by Boardman (1991).

    The 10% approach

    The energy-income ratio is defined as a "household [being] in fuel poverty if it needs to spend more than 10% of its income on fuel to maintain a satisfactory heating regime and all other energy services" (De Quero and Lapostolet, 2009; Department of Energy and Climate Change, 2001). The energy-income ratio, representing this 10% indicator, is calculated as follows:

    Energy income ratio = Theoretical fuel costs/Income (1)

    One main advantage of this ratio is that it considers theoretical rather than actual fuel costs. They are obtained by multiplying fuel requirements (theoretical consumption) by fuel prices. Considering theoretical fuel costs ensures that the household achieves an adequate level of warmth subject to a range of dwelling and household characteristics. However, this measure of fuel poverty has some limits. Although the energy-income ratio has the advantage of taking into account...

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