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New research article by Csaba Weiner and Tekla Szép in the March issue of Energy Strategy Reviews

 

The Hungarian utility cost reduction programme:
An impact assessment

 
 

Highlights

Rationale for and consequences of Hungary’s post-2012 utility rate cuts are assessed.

Substantial residential excess energy use is identified due to state price regulation.

State programme benefits are unequally distributed among income deciles.

Upper-income households are favoured; firewood-heating poor are limitedly subsidised.

Proposals: end the programme, support only the needy, prioritise energy efficiency.


Abstract

In Hungary, regulated energy prices fell by a quarter in 2013–2014 due to a state intervention. The objective of this article is to measure the effects of this change on the Hungarian residential energy consumption and assess the rationale, the policy context and other consequences of such an intervention. We decompose residential energy-use change in 2010–2018. We calculate 13.2 PJ of excess consumption relating to the programme, and find that the higher income deciles benefited the most from the lower prices compared to low-income households using market-priced lower-quality fuels and living in inefficient homes. The intervention lacked a strong policy background. The energy policy documents were later adjusted to the situation and finally the programme was linked to energy poverty. We point to price-setting failures and discrepancies between energy-efficiency goals and measures as well as negative effects of these and the programme itself. In the future, the policy emphasis should be on energy efficiency and supporting those really in need.

 

Keywords

Utility cost reduction, LMDI decomposition, Residential energy consumption, Energy policy, Consumer spending, Hungary
 

JEL classification: P22, P28, Q41, Q48

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