Implications of poorly designed climate policy on energy poverty: Global reflections on the current surge in energy prices

ABSTRACT

With the recovery of the world economy following the easing of restrictions designed to contain COVID-19, energy demand has surged, even as natural gas stocks have run dangerously low. In addition to the reduced investment in upstream energy resources, infrastructure and maintenance since the outbreak of COVID-19, the situation is exacerbated by supply constraints. This situation has triggered one of the first significant energy shocks of the green era and exposed the fragilities of the premature greening of energy system processes. A recent study indicates that 80 million European households are struggling to stay warm, and the recent spike in energy costs is expected to aggravate the problem. Here, we examine the impact of the energy-price boom on the state of energy poverty in Europe. This paper highlights how energy prices and the green transition may exacerbate the energy poverty trap in Europe. It emphasizes one of the downside effects of poorly designed climate policies. This discussion offers insights and important policy implications that may help trigger debates on energy poverty in developing countries. It argues that poorly designed climate policy may initiate new forms of inequalities and reaffirm existing ones by undermining the foundation of individuals' capabilities. It also reveals a pivotal shift in the underlying drivers of countries' future success in addressing climate change, eliminating energy poverty, and achieving energy justice. The analysis strengthens the case that climate policies must go hand-in-hand with inequality and energy poverty mitigation.