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Press Release

Press Releases

IPPR: Energy Company Obligation will only scratch the surface of fuel poverty

IPPR press release

The new ‘Energy Company Obligation’ (ECO) scheme will only scratch the surface of Britain’s fuel poverty problem and may see the Government backslide on its carbon reduction commitments, according to a new report from the think tank IPPR.

From next year, ECO will oblige energy suppliers to improve the energy efficiency of fuel poor homes in order to tackle fuel poverty and reduce carbon emissions. It will replace existing policies (the Carbon Emissions Reduction Target and the Community Energy Savings Programme) by subsidising higher-cost measures which won’t be available under the Green Deal.

IPPR’s new report shows that while there are currently 2.7 million fuel poor households in England alone, ECO will take just 125,000 to 250,000 households across the whole of Great Britain out of fuel poverty by 2023. As a result, over 2 million fuel poor households will be left out in the cold.

The report warns that fuel poor households that do not receive support may be pushed further into fuel poverty by the policy. This is because ECO is likely to increase the cost of energy efficiency policies above the £50 cost that CERT and CESP puts on bills each year. The report shows that costs could rise because of uncertainties in the delivery of the programme including how the solid-wall insulation supply chain develops and how many households take up the Green Deal. While the ECO could cost less than CERT and CESP, as low as £20 per household, it could also cost more, up to £116 on the average bill.

The report shows the UK could also miss its carbon targets because of the ECO’s focus on a narrow range of measures. The programme presumes that all outstanding loft and cavity walls will be insulated by the Green Deal – but if this presumption proves incorrect, the UK’s total carbon savings will be far lower than deemed necessary by the Committee on Climate Change.

To ensure more fuel poor households can benefit from the programme, IPPR’s report recommends that the efficiency of the scheme should be improved by piloting a new area-based approach to tackling fuel poverty and involving local authorities to a greater extent.

To reduce the risk of high costs and guarantee that carbon reductions are achieved, the report says that the Government should conduct a near term review of which energy efficiency measures should be included in the ECO.

Will Straw, Associate Director at IPPR, said:

“The Government’s ambition with the new Energy Company Obligation is the right one. Improving the energy efficiency of Britain’s housing stock is the most cost effective way to tackle fuel poverty and bring down carbon emissions.

“Nonetheless, ECO, working alongside the Green Deal, will barely scratch the surface of Britain’s fuel poverty problem and may not deliver what is needed for emissions reductions. The policy will be paid for through consumers’ energy bills and there are a number of uncertainties about the current cost of the programme. The Government must do more to ensure that their policy is as cost effective as possible. Funding local authorities to get involved and piloting a new area-based approach are both ways of improving the scheme. Focusing on low-cost improvements, like loft or cavity wall insulation, may also be needed.”

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