Fuel poverty alleviation as a co-benefit of climate investments: Evidence from Hungary

Fuel (or energy) poverty is understood as a situation in which a household is unable to afford an adequate amount of domestic energy services and/or is forced to pay a disproportionate share of its income on domestic energy. Taking Hungary as a representative case study, the paper first presents relevant indicators which indicate that 10 to 30% of the Hungarian population was in fuel poverty as of the late 2000s. The results show that fuel poverty rates in Hungary have increased in parallel to the price of imported natural gas, forcing some households to go back to heating systems based on firewood. Together with households' income and energy prices, the energy performance of residential buildings has been identified as a key contributing factor of this social and environmental challenge, thus expanding the scope of the benefits of domestic energy efficiency investments. Based on this premise, the second part of the paper presents the results of a social cost-benefit analysis according to which market (energy savings) and non-market (avoided fuel poverty-related mortality, improved comfort and avoided emissions of GHG and other harmful pollutants) benefits more than justify retrofitting Hungary's residential stock to near passive house levels. The results also confirm the relevance of co-benefits for the economic assessment of residential energy efficiency scenarios. This multi-dimensional analysis of fuel poverty emphasises the importance of co-benefits as policy drivers for the implementation of advanced residential energy efficiency solutions in countries with moderate levels of commitment to global climate goals and high or increasing fuel poverty rates.