Decarbonisation Policies in the Residential Sector and Energy Poverty: Mitigation Strategies and Impacts in Central and Southern Eastern Europe

Abstract

The decarbonisation policies for the EU building stock can improve living conditions, including thermal comfort and lower energy bills. However, these measures may impose financial burdens on low-income households, reducing their disposable income and exacerbating their vulnerability. The current study investigates the impact of decarbonisation policies on the EU’s building stock, with a specific focus on Minimum Energy Performance Standards (MEPS), the new Emissions Trading System (ETS2) for buildings, and the phase-out of fossil heating systems. By employing a linear, static latest version of Microsoft Excel (Microsoft 365)-based model and analyzing Eurostat data, this study quantifies the effects of these policies on energy consumption, costs, and necessary investments. Moreover, the study emphasizes their implications for low-income groups using vulnerability indicators. The findings demonstrate that a combination of MEPs, ETS2, and phasing out fossil heating systems effectively reduces energy consumption and costs across most countries. However, implementing ETS2 alone may lead to energy reduction and discomfort for low-income groups without addressing underlying demand-side issues. To address this, this study recommends the implementation of more ambitious MEPs or the provision of additional funding alongside ETS2. The phase-out of fossil fuel boilers emerges as the most cost-effective measure in the medium to long term. While MEPS and the phase-out of fossil fuel boilers improve living conditions, they also impose upfront cost burdens and reduce disposable income for low-income households. Therefore, high subsidy rates and supportive policies are necessary to ensure equitable access to investments. The main recommendations include (a) shifting financing to renewable heating systems for low-income households by 2025, addressing cost issues and policies favouring gas boilers; (b) implementing high-funding rate subsidies for energy efficiency in low-income households before 2025, with technical guidance; (c) prioritising the Energy Efficiency First principle in planning to avoid additional emissions or higher costs for low-income households; and (d) considering the energy behaviour of low-income groups in regulations, employing a combination of policies to achieve desired outcomes and ensure thermal comfort.