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WIREs Energy Environ.
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Equity impacts of energy and climate policy: who is shouldering the burden?

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Carbon pricing, technological supports, and energy subsidies comprise the most‐often implemented energy and climate policies. The cost of these policies has grown in recent years, resulting in equity impacts receiving greater attention by academics, policymakers, and the general public. While precise impacts are specific to particular circumstances, there are a number of primary channels through which energy and climate policies affect welfare. This paper gives an overview of how these channels operate. Where applicable, drivers of policy cost are outlined to show how these policies may grow to represent a meaningful welfare impact. Through case study analyses, we explain the most common mechanisms through which these policy costs drive equity outcomes. We review their implementation to date to give insight into the prevalence of these equity outcomes in an international context. Finally, we analyze the ability of remedial measures to counteract inequitable impacts. WIREs Energy Environ 2016, 5:492–509. doi: 10.1002/wene.201 This article is categorized under: Energy Efficiency > Economics and Policy Energy Infrastructure > Economics and Policy Energy and Climate > Economics and Policy
Comparison of electricity price for Residential and Industrial consumer (10,00GWh/annum) in Germany in 2013. Data Source: Refs. Assumptions: Industrial user incurs a 2013 EEG surcharge of 0.05c/kWh. German households assume to pay 5.27c/kWh 2013 EEG surcharge, 0.92c/kWh of this which financed the industry privilege. German ‘Surcharge’ total represents surcharge excluding the industry privileges portion. Surcharge‐related VAT is included in energy‐related costs. In Ireland, all industries paid 11.87/kVa Maximum Import Capacity, whereas residential consumers paid 27.84/annum. Surcharge costs per unit assume Irish residents consume 3300 kWh/annum, and the industrial user consumes 75% of MIC throughout the year.
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Share of household electricity prices (excluding VAT) contributing toward renewable energy subsidies in selected EU countries (2009–2012). Source: Ref ; Note: Only states with data for all the years in the period 2009–2012 included. Calculated as % of price for consumers with annual consumption between 2500 and 5000 kWh (Eurostat consumption band DC), excluding VAT.
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Effect of British Columbia carbon tax and revenue recycling on the income distribution (2008/2009). Source: Ref
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Proportion of income spent on carbon‐intensive ‘dirty’ manufacturing: Mexico versus USA. Source: Ref .
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Comparison of household burden for three countries due to energy and climate policy. Source: Refs . Germany and UK data refer to income deciles, Italy data refer to expenditure deciles. Ref shows that the use of expenditure deciles may yield a negligible change in magnitude of incidence for expenditures, relative to the use of income deciles.
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‘Burden’ by household income decile in Ireland due to different PSO levy charging structures. Source: Derived from ref.
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