Energy Poverty and Just Transformation in Greece

Abstract

AbstractLow-income population groups often face high energy poverty risks. This phenomenon can be exacerbated through the implementation of ambitious environmental policies to achieve the energy transition—said policies, such as the application of additional taxes on energy products, may lead to regressive social and distributional impacts on low-income households thus increasing the risk of energy poverty. This study focusses on Greece and combines a qualitative analysis of the EU and Greek policy context and strategic framework for energy poverty as well as related poverty alleviation measures with a state-of-the-art model-based assessment of the equity and distributional impacts of the net-zero transition in the country. We use the GEM-E3-FIT general equilibrium model, expanded to represent ten income classes differentiated by income sources, saving rates and consumption patterns. The new modelling capabilities of GEM-E3-FIT are applied to quantify the distributional impacts of ambitious emission reduction targets and at the same time explore their effects on energy-related expenditure and energy poverty by income class in Greece. The country’s transition to climate neutrality increases modestly the income inequality across income classes, with low-income households facing the most negative effects. However, using carbon tax revenues as lump-sum transfers to support household income and as reduced social security contributions have the potential to boost employment and scale down income inequality in Greece.