1, 2 or 3?

How can I purchase an electric vehicle if there are no affordable offers on the second-hand market? What incentives does my landlord have to insulate the flat? Particularly for those who have little resources, targeted and socially just measures that help in making the move to climate-friendly alternatives are essential. In addition to financial questions, there is much more to consider. The Oeko-Institut’s scientists are carrying out numerous projects concerned with identifying the specific impacts of policy measures upon the different groups in society, and are developing solutions, notably in transport and housing, to assist particularly needy groups.

To gain a clear understanding of how policy measures impact upon households in Germany, it is important to distinguish between absolute and relative household expenditure. “Absolute expenditure is higher if income is higher. Those with more income often have more living space and generally run their car not only to travel to work, but also for leisure activities,” says Nelly Unger, staff scientist at the Oeko-Institut. “However, if we look at relative expenditure, at the proportion of income, we find that lower-income groups usually bear much greater burdens.” For instance, the highest income brackets spend one to two percent of their available income on heating costs, while low-income households have to spend five to seven percent.

The picture is different again if we look at expenditure on fuels and local public transport. This is borne out by the analysis titled “Transport poverty: definitions, indicators, determinants, and mitigation strategies” performed by the Oeko-Institut together with several project partners for the European Commission. “We found here that medium-income households spend a much larger proportion of their income on mobility than those with high incomes do. Lower-income groups spend, on average, a relatively small proportion of their income on fuels and public transport. However, this is because they are less likely to own a car and more likely to dispense with mobility altogether in order to save money.” It also emerged that social aspects are very numerous and diverse. “An important question is whether one can be mobile at all. In other words: Is public transport available? Perhaps I have a physical impediment that makes it impossible for me to use public transport services? Or: How safe am I in transport systems?” The expert stresses that one has to look very closely at the details when analysing mobility. “There is no one-size-fits-all solution, for mobility differs enormously from region to region. Someone living in a mountainous landscape with lots of snowfall may not find a cargo bike particularly suited for travel to work.”

The specifics of mobility

For many, procurement of an electric vehicle can be a very high barrier. This is because the vehicles are simply too expensive for them. “Up to now there is not a sufficiently large second-hand market for electric cars. And only very few new vehicles are attractive to lower-income groups,” notes Unger. Naturally there are options by which to assist these people. For instance, by expanding local public transport services and introducing rebated fares, installing cargo bike share schemes, and setting up on-call bus and on-demand shared taxi services in rural areas. The analysis titled “Socio-economic impact assessment of the projection report to 2023” carried out by the Oeko-Institut together with Fraunhofer ISI and IREES for the German Environment Agency (UBA) has shown that low-income households profit significantly more from the Deutschlandticket scheme, a subscription public transport ticket for all local public transport valid in the whole of Germany, than households with a high income. “Nonetheless, there will always be people who absolutely need a car,” says Nelly Unger.

Social leasing can be a promising approach in such contexts, meaning that people on low or medium incomes receive grants to lease an electric car. In a study titled “How the EU can address the social barriers to the EV transition” conducted on behalf of Transport & Environment (T&E), the Oeko-Institut has shown that social leasing can exert relevant climate change mitigation effects – while also having a positive effect on the second-hand market for electric cars.

In the analysis conducted for the German Environment Agency titled “Environment and society: Interactions in selected areas of need, with a focus on the impacts of policy instruments”, the Oeko-Institut, working together with the Institute for Social-Ecological Research (ISOE) and the Forum Ökologisch-Soziale Marktwirtschaft (FÖS) economic think tank, has further shown that different instruments have different types of effects. “With a view to emissions, a vehicle tax graduated more strongly in line with CO2 emissions is worthwhile. In social terms, strengthening rail transport – local and long-distance – has particularly positive effects.” Expanding cycling infrastructure and promoting clean bus propulsion systems has positive effects for the environment and people alike.

The specifics of housing

In the buildings sector, too, there is often social imbalance. Grants for building retrofits are often claimed by those who already own a lot. This is partly because they live in their own properties and are often better informed about the available options. “Of course it is important to provide grants and incentives in such constellations as well, in order that things get moving,” says Katja Schumacher, scientist and deputy divisional head at the Oeko-Institut. “But a stronger focus must be placed on vulnerable households.” The expert stresses the need to distinguish between the various players – tenants, owner-occupiers and landlords – and develop approaches tailored to each group. Tenants are often not in a position to improve the efficiency of their own four walls by themselves – yet they bear the cost of poor insulation and outdated heating technology via the CO2 price. “Of course one can save energy by means of better heating behaviour. But what really counts is energy performance upgrading of the building and modern heating systems.” In the project titled “Socially just grants for energy performance upgrading of rental housing” conducted in cooperation with Averdung GmbH on behalf of Deutscher Mieterbund (DMB), the German association of tenants, the Oeko-Institut scientists have analysed ways to configure renovations in rental housing in a socially just manner. One proposal emerging from the study is to adjust the BEG federal grant scheme for efficient buildings, which up to now mainly benefits wealthy owners. “We consider it expedient to introduce a grant bonus for landlords coupled with a rent ceiling. In this way savings in energy costs would actually benefit households and would not be compensated by rent increases,” notes Schumacher. A further purposeful measure in the view of the project team is to provide additional financial resources from the federal budget for social housing (sozialer Wohnungsbau), i.e. housing construction that receives public support in return for reduced rents over a fixed term. “This could help to preserve affordable housing or even create more of it.”

In the study titled “Analysis and recommendations on reconciling affordable housing with climate action” the scientists show, together with the Institute for Ecological Economy Research (IÖW), how building owners can be motivated to improve their climate performance. The key is a balanced interplay of diverse measures that create incentives for the necessary transformation, improve cost-effectiveness and facilitate social balance. The CO2 price is an important aspect, for it influences the cost-effectiveness of investment decisions. “Moreover, there need to be minimum energy efficiency standards for better guidance, and socially graduated grant schemes for heating system replacement and building retrofits,” says Schumacher. “Low-income households should receive much stronger support, while those with high incomes don’t really need support at all. In addition, in order to prevent tenants being burdened excessively, a new approach is needed in the way renovation costs are passed through to tenants.” Conducted on behalf of the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), the analysis underscores the relevance of advice and information – for tenants and owners alike.

“This involves providing energy advice and drafting individual retrofit schedules. One-stop shops that provide ongoing, comprehensive advice to homeowners throughout the energy upgrading process of their building have proven to be a highly effective instrument. For not every owner has the financial resources, the knowledge or the contacts to craftsmen that would be needed to handle everything themselves.”

Climate bonus for all?

One option frequently discussed as a way to assist vulnerable groups in coping with rising costs due to CO2 pricing is a climate bonus (Klimageld) – a direct payment to citizens that is financed by the revenues from CO2 pricing. “For a brief period, this can certainly mitigate particular burdens,” says Katja Schumacher. “A climate bonus for all, however, would not be prudent and could even amplify social inequalities. This money is better channelled into support for investment in climate-friendly alternatives.” In their Policy Brief “Climate bonus? Only if socially graduated and time-limited”, the Oeko-Institut scientists further stress that a climate bonus does not lead to fossil fuels being saved and therefore does not deliver a climate change mitigation effect. “If at all, such a scheme should be time-limited and socially graduated for low-income households,” notes Dr Katja Schumacher. The bulk, however, should be deployed for socially just climate action. In order to help those who don’t have much. And to help the climate.

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Nelly Unger holds a bachelor’s degree in social economics and a master’s in macro-economics. She joined the Oeko-Institut’s Resources & Transport Division in 2022, where, among other things, she models distributional effects in the transport and buildings sectors and shapes participation processes for sustainable mobility. Her colleague Dr Katja Schumacher is deputy head of the Energy & Climate Division, which she joined in 2007. She analyses strategies and instruments of energy and climate policy, conducts economic analyses and explores social aspects.