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Who should foot the bill for energy transition costs?

31 January 2019

Energy transition image

The British public supports a transition to a low-carbon energy system, and is willing to shoulder some of the costs, on the condition that energy companies and government accept their fair share of responsibility, according to a study carried out by Cardiff University researchers.

The adoption of new technologies and infrastructure required to transition to a low-carbon energy system will bring multiple benefits - including improved energy efficiency, falling technology costs, and avoided climate damage. It will also bring additional costs, with the public likely to bear these, either indirectly through taxation or directly from energy bills.

On behalf of the UK Energy Research Centre, the team surveyed 3,150 members of the British public and ran a series of focus groups, revealing the groundswell of support for energy system change, whilst also highlighting the widespread mistrust of energy companies and government.

Primary responsibility for funding the energy transition was found to lie with energy companies and the government, the public were found to be responsible to a lesser degree. Many respondents thought that they were already paying substantially, while energy companies were seen to contribute little. It was therefore considered unfair to ask the public to take on more of the financial burden, while energy companies were perceived to be protecting their profit margins.

People are willing to contribute more

The public support between 9-13% of their energy bills going towards environmental and social schemes, this is above the 7% per bill reported by Ofgem at the time of the research and presented to participants.  Willingness to contribute financially towards the energy transition was found to be dependent on the perception that energy companies and government were also contributing and showing real commitment to energy system change. Those with a greater perception of this behaviour were found to accept higher costs on their bills.

51% of the British public support higher regulation, or nationalisation of energy

Respondents were sceptical of the actions and investment by energy companies and government. Many reported that they did not trust information published by energy companies, the government or the regulator. Distrust of energy companies related to concerns regarding the levels and allocation of profit, highlighting the perception that a privatised energy system prioritises profit over affordability and low-carbon energy. 51% of respondents were found to support heavy regulation, or nationalisation of the energy companies. Whilst the trust in the government was found to be at a low level, it was higher than trust in energy companies. Crucially, distrust in government seemed to stem largely from perceived close connections with the energy industry.

Dr Christina Demski, from the School of Psychology, said: “The UK Committee on Climate Change estimates that 15% of bills will need to go towards levies by 2030 to meet emissions reductions required by the fifth carbon budget, but only one out of five of those questioned found levies this high acceptable.

“Increasing the financial burden on the public without addressing concerns about how costs are distributed will likely result in further distrust and jeopardise public support for the energy transition.”

Professor Nick Pidgeon, from the School of Psychology, added: “Whilst action is already being taken by government and the regulator to address some of the issues highlighted by this research it remains to be seen whether these will be sufficient. In some cases, more fundamental action might also be required, for example considering alternate governance structures, including not-for-profit arrangements as with some water utilities.”

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