Huge expenditure – energy costs: 141 million people are at risk of poverty

Russia’s war against Ukraine last year led to a drastic rise in energy prices worldwide. This has led to significant direct additional costs for households, for example for heating, cooling and mobility, but also – due to the dependence on global fossil fuel supply chains – to an indirect increase in their spending, for example through higher prices for other goods and services. Households were affected in different ways – depending on how high the income is, how the money is spent and how and where purchased products are manufactured, write the scientists around the Austrian economist Klaus Huacek of the University of Groningen (Netherlands).

87 percent of the world’s population covered
Therefore, the research team modeled the direct and indirect effects of increased energy prices on more than 200 groups with different consumption levels. The data represents the population of 116 countries and covers approximately 87 percent of the world’s population.

In the scenario that assumes a doubling of the price of coal and an increase of 51 percent in oil and 94 percent in gas prices, the authors assume that total household energy costs increased by 62.6 percent to 112 percent. .9 percent. This resulted in an increase in total household spending from 2.7 to 4.8 percent. The load varies due to differences in supply chain structure, consumption patterns and energy demand.

Poverty reduction achievements have been wiped out
The researchers warn that these massive increases in costs could push an additional 78 to 141 million people worldwide into extreme poverty. In poor countries, such as sub-Saharan Africa, the rising cost of living is undermining “hard-won gains in energy access and poverty reduction,” the scientists write in the paper.

“Our research underscores the need to accommodate the increased cost of essential goods due to rising energy prices, especially food and especially for low-income households,” the scientists write in their paper. As different types of households experience high prices in different ways, they would also need different types of support. But the aid packages introduced by many governments to dampen energy costs lack sufficient detail.

“Any political measure that pursues standard solutions and does not differentiate according to level of concern wastes taxpayers’ money and does not help those who need it most,” explained Huacek.

Don’t forget about climate protection goals
The researchers also emphasize that measures to address the high cost of living must be consistent with climate protection goals. But high energy prices would transform global energy markets, prompting some European countries to delay fossil fuel phase-out, look abroad for alternative sources such as liquefied natural gas (LNG) and invest more in carbon-intensive infrastructure.

Overall, “emergency measures could delay the energy transition and further slow down already diminishing efforts to protect the global climate,” the researchers warn. Instead of investing in fossil infrastructure, money should be spent on efficiency and energy savings, Huacek stressed. “By investing in energy efficiency, the goal of ‘mobility and warm homes for all’ could be achieved with low costs and CO2 emissions,” said the scientist.