Transcription

• Speaker #0

  Why? Why? Policymakers believe that vulnerable households have a few thousand euros in their pocket to invest and then reclaim the price of their new heat pump. Like, why? And if they have it in their pocket, why do they need a subsidy? So it's just incredibly... Like, I think... Often policymakers still believe that we only need to incentivize these investments, so we have a little bit of money, so people would do it more willingly than without the support.

• Speaker #1

  The EU's energy transition includes explicit commitment to prioritize vulnerable households. The Energy Performance of Building Directive, for instance, requires that financial incentives target energy poverty affected households. The Energy Efficiency Directive requires member states to make the best possible use of public funding for investment supporting low-income and vulnerable consumers. There are legal obligations. And yet, the negotiations are currently underway on the Multi-Annual Financial Framework, or MFF, for 2028-20. 34 contain no earmarking for vulnerable households. Committees in the European Parliament have been moving to remove even the weakest just transition reference that exists in the Commission's proposal. Evidence from cohesion funding and national renovation programs shows that public money, absent targeting requirements, flows overwhelmingly to those with the financial capacity to co-invest. And as Sophia Bayomi has been the past... several years mapping exactly this gap between what EU law says should happen and what budget architecture is designed to deliver. Her doctoral research examined the situation of vulnerable firewood-dependent households in Hungary, where EU transition policies encounter both a severe energy vulnerability profile and a national government structurally resistant to redistributive Vinny G. Polisi. At FANSA, the European Federation of National Organizations Working with the Homeless, she has extended that analysis to the EU's institutions themselves, tracing the line between legislative principle and funding reality across many instruments, including the EPPD, ETS2, the Social Climate Fund and the MFF. So in this episode, we will reflect on what happens when the legal framework says one thing and the budget says another. what determines which one wins and who bears the cost of that gap. I'm Marine Cornelis. Welcome to Energetic. Anna, welcome to the show.

• Speaker #0

  Welcome, everybody, and thanks for this opportunity and for the introduction.

• Speaker #1

  Of course, Anna. Thank you so much, Anna. So you have a background in social policy and urban planning. And you have moved between municipal government, parliamentary offices, research institutions, civil society and housing NGOs in Hungary and also in Italy before arriving at EU level advocacy. That's quite an unusual path to energy policy. So what's your understanding of energy poverty before you were working on it professionally?

• Speaker #0

  So already when I was a teenager. I spent time in Hungary in one of the poorest regions in a rural Roma settlement. And during our visits, I discovered the low quality housing stock in which this community was living and the use of firewood and the really heavy indoor air, which made children sick. and it stuck with me. Within my university studies, I got interested in urban studies, housing policy, and putting all this together, I ended up working on first segregation problems in post-industrial cities. But then during my master thesis, I already wrote my thesis on the energy efficient renovation of social housing stock, which is very low quality as well in Hungary. And that's where I started to explore the EU energy framework and all the energy efficiency targets. And I was wondering why these targets are not translated into opportunities to improve the housing stock of the most vulnerable people. And then... Combining my interest, I worked in an urban planning department at the municipality of Peterpest, then started to work on energy poverty in the European Parliament as a trainee. And I kept my interest to energy poverty. And I tried to develop my professional work along that with my PhD and then my work at Fianza.

• Speaker #1

  Yeah, and... When we met, you were working on your PhD, which examined vulnerable ferrywood users in Hungary. They fly totally under the radar in your policymaking. You very often are the only person raising their hand and saying, look, the energy transition is not completed everywhere. We still have people who burn solid fuels, including their trash, in order to heat in the winter. What do these households, because you're still working and are very often very close to them, so what do these households tell you about the energy transition that this kind of official statistics and policy document is missing?

• Speaker #0

  So the example of solid fuel users is highly relevant to illustrate how often the energy transition overlooks the most vulnerable ones. For example, the price of firewood is not monitored officially at an EU level, while electricity and gas prices are. And when a crisis hits in, immediately the Commission responds to the crisis by better or worse measures to mitigate the price impact of the crisis. But firewood users are always... forgotten because they are simply not appearing in the statistics. While in Hungary, firewood price increased in 15 years threefold, while the gas price only got 1.4 times higher. And we have European measures to protect electricity consumers and gas consumers, but there is no protection framework for solid fuel users, including firewood users, despite the fact that across Central and Eastern Europe, in many countries, the majority of households in poverty who are not connected to district heating are dependent on solid fuel, firewood especially. We got... to 80% in the Baltic countries and still around 40% in Hungary, so among the poorest households. And this is a really large group. And on the other hand, the EU is really proud of the increasing use of renewable energy sources. And in the heating sector, it is overwhelmingly reached by solid... BFUS, partly by district heating in the Nordic countries, but also very importantly by the firewood burned in these poorly insulated homes, creating indoor and outdoor pollution, which is then mentioned in countries that are being also punished by the European Union because of air pollution issues caused by firewood burning. which is then on the other hand is motivated because the renewable energy targets are mandatory and the energy efficiency targets are not. Therefore, member states are incentivized almost to keep burning firewood, while not that much to reduce significantly the energy need of households and consequently the use of firewood.

• Speaker #1

  That's so crazy. That's just so schizophrenic and totally embodying this challenge that the EU and EU countries and at the end of the day, the EU people, people living in Europe are between a rock and a hard place, right? And with the recent energy price crisis and caused... by the Israel and US war in Iran and the bloc of farmers, is the response of the EU also focused very much on energy, like electricity and gas prices again, and not enough on solid fuel?

• Speaker #0

  Yes, it's again the same. The problem of solid fuel users is not at all appearing in the crisis response documents. And while there are good elements in the crisis response, like asking member states to protect vulnerable households, to work on not to disconnect households from energy supply, and also in general to reuse. for example, energy taxations. But often these measures, while are well-intended, and they at the end aim to reduce energy prices for all, on the one hand, they forget to intervene on the energy price of the fuel used by the most vulnerable ones, which is always indirectly impacted by price increases. hang it like it's Not every country has good data on the cost of different fuels, but Hungary fortunately has. So we can always see in the charts that when gas prices increase, gas use decrease, firewood use increase, and that pushes up the firewood price. and in the latest energy crisis. Firewood prices were increasing much radically than gas or electricity prices. It's complicated in Hungary because we have regulated electricity and gas prices, but firewood prices are not regulated. So this is always overflowing to the firewood prices. And what I also wanted to say related to the generic measures, that if we are concentrating on bringing down... For example, electricity prices by tax reductions, for example, what is really a favorite tool of the commission. The distributional impact will be again benefiting the affluent groups who have higher consumption. And for them, a 10% reduction will generate significantly more savings compared to the smaller consuming vulnerable. households that have less electricity consumption.

• Speaker #1

  That's interesting. And I think there is also a very important seasonal element really showcasing the vulnerability of the firewood users. As you know, I've worked quite and I'm still working quite extensively on summer energy poverty, summer resilience, the fact that heat waves are harder and harder on us, on our lives. and And actually, for the record, I remember very vividly the summer of 2007 being in Budapest and facing. I was living in Budapest at the time and I faced so many blackouts because of the heat. And that's completely clear that there is no solution. There is not even a thought or afterthought for the people who heat themselves with solid. because they can't afford any cooling system at all anyway. So they are facing a double hardship for this use of solid fuel.

• Speaker #0

  Yes, exactly. Often these solid fuel stoves are found in dwellings, which are anyway in quite a bad shape, including their electric wiring, which is already sometimes dangerous. Once I've been in a village in this region that I already mentioned, and we were staying in this village house. And every time when I tried to open the fridge, I got a little bit of electric shock of the quality of the electric wiring. And I think it's not an individual issue. We have statistics that over 100 million electric installations in Europe are outdated. So we already need to start with that before installing additional electric installations like an air conditioner. We need to fix that. And also, I was surprised about the share of solid fuel. cooking in Europe.

• Speaker #1

  Yeah.

• Speaker #0

  Which is always... How much is it? Well, at a European average, it's very little, but it's 1 or 2% maybe. But in some countries like Greece, it can go up to 15%.

• Speaker #1

  Wow.

• Speaker #0

  And if you imagine that you are cooking with solid fuels also in the summer, then in the winter it's really convenient because while you are heating your kitchen, you can also cook. But in the summer, you have excess heat because of your heating method. And yeah, sometimes it is used interchangeably. They might have a gas fuel stove as well. um

• Speaker #1

  Yeah, and there's nothing glamorous in using only fire and barbecue for your cooking, right? So it's also one of the things that make this kind of statistics totally invisible.

• Speaker #0

  Yes, and also in the Central Eastern European region, while it is not related to solid fuels, but I guess it's a problem across entire Europe, but we also have high-rise multi-apartment buildings built during socialism without any insulation from concrete blocks, and these can also dramatically overheat during summer. And in the delay of deployment of insulation and solar electricity, these house, these... buildings get hotter and hotter during summer. They don't have any shading. And because of the characteristics of the building material, they really collect all the heat during the day and then they radiate the heat during the night. And I am living in such an apartment and I'm trying to convince the local representative at the municipality See? The building manager, we've been writing with the local NGO letters, raising attention that it can also be deadly for elderly people to stay in such hot apartments if they have health conditions. But the renovation of these buildings are moving really, really slow. And even when they get renovated, they are not necessarily paying attention to you additional issues. They put the insulation on, maybe some solar panels, but they are not tackling the passive cooling, necessarily the indoor air circulation or outdoor shading solutions that would protect this.

• Speaker #1

  Yeah, and that's very narrow. And that's overall one of these issues that you have like funding for one thing. And so you look into one thing, but you don't look at the bigger picture. When sometimes you would need to have a more comprehensive solution to make a difference in the true difference in the life of people. Because there are also proofs that sometimes if you insulate in a certain way, you can really make the indoor environment much better. warmer also in the summer so that's uh that creates like this kind of yeah trap uh for for heat like a greenhouse so that's uh indeed um yeah very very challenging but one of the things you've been working on is the eu funding and you've been saying that uh there is a lack of earmarking of eu funds and so as a result the eu funds flow to households who could have financed the transition themselves, at least in a big portion of it. And you have pointed to very concrete evidence from cohesion funding and national renovation programs. Can you walk me through the mechanism by which that happens and why the absence of a targeting requirement produces such a predictable... distributional outcome. And it's interesting because a few episodes ago, we had Adrian Hill from the Electrification Alliance who said himself, I could have paid for the work myself, but I was entitled to grant. So it's just the way things are done. And of course he used it because he could, but why is it still happening, Anna?

• Speaker #0

  I really don't know. And I would be so happy if someone would tell me the answer, but I think it's a really bad way of using public subsidies. And not like in my work, I advocate for the improvement of the homes of vulnerable households. And from my perspective, it is definitely. A very problematic issue that there are households that are suffering day after day in their very bad housing condition. Children get sick. They don't go to school. Parents can work less because they also get sick in these circumstances. And there are so many reasons. And also there is some science there showing that returns of investments in that specific segment are the largest. and are really quick. Yeah,

• Speaker #1

  it's like a low-hanging fruit in a way.

• Speaker #0

  Yes, it would be like, it wouldn't only bring benefit for these households that maybe are politically not so important, but it would also benefit for the common interest, like reduced health costs, better economy, and also these kids would reach them later. higher achievements, can get better jobs, they will pay higher taxes, and they won't rely on the social security system. So these are really long-term investments that already generate a return in short term. And the reason behind the ineffectiveness of these fundings are sometimes very simple, sometimes more complicated. Okay, the simple ones. It's basically the design of the schemes. Like in Austria, they had a subsidy for replacing heating systems targeted to the lowest income households. And it was a post-financing scheme. And sometimes I feel that I want to bang my head to the wall. Like, why? Why? Policymakers believe. Then vulnerable households have a few thousand euros in their pocket to invest and then reclaim the price of their new heat pump. Like, why? And if they have it in their pocket, why do they need a subsidy? So it's just incredibly... Like, I think often policymakers still believe that we only need to incentivize these investments. and a little bit of money so people would do it more willingly than compared to without the support. But I think now we are already in a place where we see the impact of the climate crisis on our everyday life. People are more aware and they would anyway do things maybe they need other like guidances, technical facilitation, management in building. So many other soft tools would facilitate better the energy transition than these generous funding schemes. Also in Hungary, we had a renovation scheme, which was originally quite a good idea because it enabled households not only to work on the... energy efficiency of the building, but to any kind of renovation measure that is necessary. But also there, it was a post-financing mechanism and it required a few things that usually vulnerable households are not able to demonstrate, like two years of legal employment history.

• Speaker #1

  Oh, wow.

• Speaker #0

  having a certain number of children below a certain age, which is not necessarily overlapping with vulnerability, the number of kids you have and their age.

• Speaker #1

  Yeah, it's increasingly patronizing, this kind of question.

• Speaker #0

  Yes, and also not having public debt. And we know that the poorest households... In Hungary, have more debt than assets. So basically, if you are in the poorest income category, you most likely have some kind of debt. So you will not be eligible for this kind of support. And Habitat for Humanity Hungary made an excellent program together with Erste Bank. Erste Bank was pre-financing the renovation costs and Habitat put... next to it the social work to find. And they keep saying that it was incredibly hard to find among... The households that they work with and they see day after day which kind of bad housing they are living in. And they try to feed this household in the program. And it was extremely hard to find one that would be eligible. And that's really problematic. Once they found one, then they had to put social work hours in it too. help with the paperwork and also to find a good quality working workforce to deliver the renovation. And for example, France already knows that it's not enough to give money, but they need to have local offices where people go out to their families and they explain the need for renovation and they facilitate the whole application procedure and provide technical advice. And it's complicated.

• Speaker #1

  Yeah.

• Speaker #0

  It needs time. But unfortunately, it is the way to go.

• Speaker #1

  Yeah, exactly. Exactly. Like this kind of offices. So there is the program called Slimy in English, or there is a Resoico Habitat, which also works exactly this way. But it takes for each of the case, it takes about two years to set up like the older. the funding because you need to combine grants, you need to fill a lot of paperwork. So it's not something, it's extremely complicated and it works best for single family housing and not like multi apartment buildings. But at the same time, they are also trying to work with low hanging fruits like work, if they can do some immediate fixing of the house. Just to start somewhere and to already give people hope and dignity, right? Because I think they are like, for the people who have never visited a household in energy poverty, or if they have not been energy poor themselves, they don't realize that the home is for everyone in the Maslow Pyramid. It's like the place where you need to feel safe. And if it's shattered, of course, your dignity is shattered as well. You can't trust anything in life if the foundations are not good. So this feeling of lack of urgency among policymakers also drives me kind of, yeah, it drives me mad because we're facing so many challenges at the right time. And fixing the home, fixing the energy system would be a way to make our societies way more. way more cohesive in a way and would be able to make us more resilient towards all the challenges ahead. And they are there. Of course, there are many. So in talking again about France, one of the challenges of the program is that every year they have to fight to get their funding in their budget and the funding lines and so on. So there is this, the country, there is always this kind of...

• Speaker #0

  fund and go or stop and go policy is it's also it is also something you've been working on right yes i think predictability should be there because these are long-term projects and also in order to identify vulnerable households in one of them plan and then carry out the works there is a need for stability and Going back to France, it's a good example in the sense that they are providing higher funding rate for lowest income households. But still in France, even the highest income group can benefit from subsidies, repaying part of their costs that they probably wouldn't need. And on the other hand, lowest income households still need to contribute. then 20% of the work, which could be if a complex renovation costs 60,000 euros, it can be fixed at 12,000 euros, which obviously not in the market of this household. So even the most progressive large-scale scheme in Europe still... struggling to incorporate the most vulnerable ones on the expense of still providing support for the richest households. But at least they realized a few years ago when they had a tax rebate program that 80% of the benefits are going to the richest 20% and they realized that it's not fair, so they made a big... reform in order to have a more progressive scheme. And getting back to the level of EU funding, there was this analysis of the Jacques Deler Institute on Cohesion Policy, which covers many, many things, not only energy efficiency, and even when it arrives to the poorest regions. EU funding fails to reach the poorest households because it's always easier to find the middle class. It's usually the middle class that get employed in EU projects locally. They get, for example, in Hungary, working in an EU project when you work in the social sector, it means that you earn maybe double than your colleagues. So these benefits are going to the more prosperous. segment of the society in the poor regions and reaching the poor households is often just technically harder also the european funds are really bureaucratic they also have some requirements people in the poorest households often do not have so they live legally in their homes but maybe the paperwork behind it it's not 100 perfect therefore not eligible for funding that there they would need some legal and social work to fix those things, but these are not included in the EU funding schemes. Also, again, the problem of debt. If you have debt, you might not be eligible. There is no systematic program to tackle debt in order to access, to facilitate access to funds. And there are no specific requirements, while on the other hand, with the energy efficiency funding, they have quite strong indicators on CO2 reduction or kilowatt hours to reach. And it's always easier to reach those indicators among middle or upper classes because it's more straightforward. So there is no motivation to go. to the more problematic segments of society. And getting back to the directives that you cited at the beginning, the EPBD and the Energy Efficiency Directive, fortunately, clearly says the need to reach at least a proportional share of all energy savings among vulnerable households to... prioritize public funding among them and also to target renovation funding in priority to vulnerable households. But the way these elements are included in the directives are not easily translatable and not easily, there are no mechanisms behind it that would ensure the implementation. Maybe the exception is the true reaching the proportionate share of vulnerable households with energy savings, it's quite specific because if you reach 100 kilowatt hour of saving, then 10% should go at least to energy-poor households if you have 10% energy-poor household in your country. But currently it's not yet. It's also quite a new, a few years old requirement. While, for example, regarding the EPPBD, there are already infringement procedures related to subsidies for fossil fuel boilers. There is no infringement procedure for the lack of earmarking of, or at least targeting, proportional use of funding. So it's not a priority.

• Speaker #1

  And yes, and you also said that in the multi-annual financial framework, 2028-2034, there is no reflection of these principles either. And so how do you explain this? Yeah.

• Speaker #0

  So the Energy Efficiency Directive says that EU member states have to make the best possible use of EU funding in order to deliver energy savings to vulnerable households. But reading the MFF proposal, there are some elements that refer to just transition and the need to enable everyone to participate. in the energy transition. But this is not specific enough because it's just a specific objective to enable everyone to benefit in the energy transition, but it's not translated into specific measures that therefore you need to use at least proportionally or each income group should be benefiting from the funds.

• Speaker #1

  Yeah.

• Speaker #0

  At least proportionally, I would say not necessarily proportionally, because we don't need to subsidize the richest households from public funding, because also the EU says very actively that we need to leverage private finance. And there are also indicators dedicated to the monitoring of the, like in the monitoring framework. And there, once it appears, related to energy efficiency investment, and they need to monitor the number of households that are reached by these measures. But again, it's not the right tool because in the energy efficiency measures, they list, among others, advice.

• Speaker #1

  So if one member says,

• Speaker #0

  like, yes, it won't translate into... And we can reach a large number of households with advice, but we would need to monitor the share of energy savings reached among these households because this is what matters. So therefore, we were already formulating some amendments because FEAT is also working, of course, on homelessness and housing solutions for homeless people. So we are providing our feedback and proposing amendments. It's... When I read the different committees' contributions to the debate and their suggestions for amendments, I noted that both the ITRE committee and the ENBI committee working on industry and environment, some of the representatives are systematically deleting any reference to just transition and watering down the... This specific objective that aims to enable everyone to benefit from the transition into some more blurry affordability formulation, which totally dilutes the aim of inclusivity.

• Speaker #1

  It's really something that you find as anti-egalitarian in Hungarian energy policy as well. And that's really... terrifying right because a transition that excludes people completely feeds the forces that are that are trying to dismantle it like it's a say there are really some actors who see just a zero-sum game especially on the other side of the pond uh the atlantic pond so it's really it's it's really time to wake up and see that energy policy is citizenship and is democracy and everything is totally linked. So there are really governance and design gaps that need maybe more aggressive actions also from the EU. And there have been some recent documents published by the EU, like the EU Citizens Energy Package and some documents as well, but they are not mandatory. so They can encourage member states to go in a certain direction, but they will not change the course of things if the states don't want to listen, right? I don't want to end on a negative note, but I want to end with some inspiration from you. Anna, you've been working on this well for a lot of time. You've been gathering so much really, really, really interesting evidence. And I would like you to tell us if there were some... you know, design choices that could still be made that would make a difference, like maybe in the MFF funding, in the way the social climate fund is rolled out, in the kind of instruments the EU is developing. I mean, that can also be linked to some kind of arguments that is not being made at your level, something that the policymakers would need to take home, because that's the right moment to address it, although they may not know it yet.

• Speaker #0

  Yes, so I think it would be nice if the results of the research showcasing that investment And... in the poorest households in terms of retrofitting, provides the highest and quickest returns, would arrive to the policymakers. And also maybe the private finance sector should play their role in highlighting that until very generous subsidies are provided to you Without any targeting, it takes the place of the so much needed private finance because nobody would take up a loan if they can get a free subsidy. So it's also in the interest of probably the financial institutions. And also the Energy Efficiency Financing Coalition of the European Union It may be in that. great effort of leveraging private finance. They should also look into how public finance is spent and whether it is truly just leveraging funding, or it is maybe replacing the market because it takes away the place of private finance. And in the US, in the New York state, There has already been a period when climate investments were mandatory, partially targeted to underserved communities with a very detailed design. And it was mandatory so that the benefits of climate measures, 35% of the benefits should go to underserved communities. And it created a various range of programs from district heating installations to solar panels to training programs for workers, maybe installing those solar panels in order to distribute the benefits in a socially meaningful way. And if in the US, which is way more capitalistic and free market friendly. on paper than Europe. If they could do it, I think Europe should also be able to do it. But in the context of...

• Speaker #1

  So you can make it there, you can make it anywhere.

• Speaker #0

  Yes, but in the context of the current defence and competitiveness and simplification agenda. On the other hand, it's really difficult to advocate for earmarking because it's an additional bureaucratic burden. But unfortunately, I don't see any other way to ensure that funding is arriving where it should arrive. So it's difficult to get to that point.

• Speaker #1

  Yeah, okay. That's an extremely interesting and sobering conversation, Anna. Thank you for taking the time. And I will definitely put some resources in the show notes. And thank you. Thank you so much. See you next time. Thank you. Thank you. Energetic explores the people, policies and institutions shaping Europe's and the world's energy transition. I am Marine Cornelis. If you found this conversation valuable, you can share it with colleagues working on housing, governance and consumer protection. You will find references and further reading in the show notes. Until next time.