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Heating and Electricity Expenses: Saving Incentives Not Impacting Basic Income Recipients

DIW Weekly Report 14/15/16 / 2023, S. 113-118

Lars Felder, Peter Haan, Stefan Bach, Wolf-Peter Schill

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Basic income benefits cover recipients’ actual heating expenses as long as they are not unusually high. In contrast, their electricity expenses are only covered via a lump sum at the standard rate. Thus, basic income recipients have weaker incentives for reducing their heating expenses than for reducing their electricity expenses. Using Socio-Economic Panel (SOEP) data, it can be seen that basic income households have higher electricity bills despite this incentive: On average, they spend five euros more on heating and nine euros more on electricity than comparable households not receiving basic income. These higher bills may be due to a lack of sufficient information about their expenses and ways to save energy, or they are unable to save due to non-energy efficient electrical appliances and longer attendance time at home. These interrelationships need to be taken into consideration when drawing up a climate policy that aims to provide savings incentives by increasing the CO2 price; such a policy can only be effective if households are able to react to price incentives. Thus, in addition to increasing the CO2 price, targeted subsidy programs for energy efficiency measures as well as information campaigns for households are needed.

Wolf-Peter Schill

Head of the research area „Transformation of the Energy Economy“ in the Energy, Transportation, Environment Department

Stefan Bach

Research Associate in the Public Economics Department

Peter Haan

Head of Department in the Public Economics Department

JEL-Classification: Q41;H53;D31
Keywords: energy cost, heating cost, social transfers, income distribution

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