Sweetening the deal for heat decarbonisation

(EurActiv, 26 Apr 2021) How can we expect people to invest in heat pumps if we deliberately make electricity more expensive than fossil gas, oil and coal? That’s like taxing water and subsidising sugary drinks, argues Samuel Thomas.

Samuel Thomas is a senior advisor with the Regulatory Assistance Project.

Many governments recognise the link between sugar consumption, obesity and diabetes. As a result, sugar taxes are now in place in more than 50 jurisdictions, including nine European countries. The UK and Ireland introduced modest sugary drinks taxes in 2018. One year later, sugar consumption from soft drinks in the UK had fallen by 10%.

If only reducing carbon emissions from space heating were so straight forward: Stick a carbon price on the fuels used in buildings and emissions will fall. The problem is that carbon emissions and sugar are different beasts.

Sugar-sweetened beverage demand is price elastic — an increase in price leads to a bigger proportionate fall in consumption. Consumers can easily switch to low-sugar alternatives and suppliers can reduce the amount of sugar in their drinks.

Demand for fossil fuels used in buildings is very price inelastic — an increase in price leads to only a small decrease in consumption. Switching heating fuels is not as easy as reducing sugar intake. Building owners need access to finance to invest in new technology and often fabric improvements too.

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EurActiv, 26 Apr 2021: Sweetening the deal for heat decarbonisation