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Research: Renewable Energy, How to Invest While Sharing Costs Fairly?

Published on
09 December 2016

Countries are investing billions to foster renewable energy. Yet these investments do not necessarily consider who is footing the bill and whether each household is paying its fair share. This latest research highlights concrete principles that can help guide governments to implement a fair distribution of costs.

This article from David Grover is the subject of the 31st GEM LAB Executive Summaries.

From the article

Distributive fairness in paying for clean energy infrastructure – Harry Granqvist, David Grover
Ecological Economics -

Debates around the subject of renewable energy are almost always focused on technical, scientific or economic issues. The actors in this evolution rarely speak about renewable energy in terms of fairness and social equity. However, the investments at stake are colossal and social inequity is a growing factor throughout OECD countries.

Polluter pays versus the right to pollute?

If the general public ever realizes that certain households were unfairly penalized by energy investments, public opinion might turn against renewable energy and future actions to fight climate change. As a result, the goal of this latest article is to reinstate fair-cost distribution as a key principle in the field of renewable energy.

The authors remind us of the main principles cited by research:

  • the polluter pays model, the ability-to-pay model (the rich pay more),
  • and the beneficiary pays model (those who gain most from polluting activities have to pay the most).

In addition, the researchers highlight the importance of the principle known as the right to pollute. Those who have polluted in the past should have the right to continue polluting for a certain time in order to avoid a brutal end to their activity, which would make them fervent opponents to any change.

Three criteria to encourage fair investments

To determine who should pay for what and to create a fair solution, policymakers can use a combination of the above cited principles. The authors suggest three criteria to help guide such a discussion:

  • Investment costs for renewable energy should be borne by households that can afford it and those that use polluting products.
  • A household's financial participation should be proportional to its income, its use of polluting activities or objects, and the benefits gained from polluting activities.
  • Compensation should be provided to support households with lower income in order to avoid investment costs becoming a burden.

When looking at existing photovoltaic programs in Australia, Britain and California, the researchers highlighted that these criteria are rarely followed and fairness is hardly the guiding principle. They underline the need for leaders to consider this issue when developing future projects.

Key points

  • The principle of fair-cost distribution should guide governments to determine who is responsible for the cost of renewable energy.
  • By supporting a fair distribution of costs, governments will avoid the loss of widespread political support for renewables.
  • Three criteria are proposed to help determine which households should foot the bill and how these costs should be spread out to avoid penalizing those with lower income.

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