Climate action can address the cost of living crisis

This briefing by Zero Carbon Analytics argues that the current global cost of living crisis is driven by fossil fuel price volatility, particularly natural gas, rather than the transition to net zero. It posits that accelerating the adoption of renewables, improving energy efficiency, and electrifying heating and transport are the most effective long-term solutions to reduce energy costs, enhance energy security, and lower emissions.

• The current energy and cost of living crisis is primarily driven by a surge in fossil fuel prices, specifically natural gas, rather than renewable energy policies. Factors contributing to this include post-pandemic demand increases, insufficient supply investment, and the Russian invasion of Ukraine. In Europe, gas price hikes were the primary driver of increased wholesale electricity prices, and energy price rises accounted for 50% of annual Consumer Price Index inflation in May 2022.
• Lower-income households are disproportionately affected by rising energy costs because energy bills represent a larger share of their income. These households often face 'energy poverty,' characterized by low income and inadequate energy efficiency, and they lack the capital to invest in efficiency upgrades, solar panels, or heat pumps. This is further complicated for renters whose landlords may be unwilling to invest in insulation.
• Expanding renewable energy capacity reduces electricity costs and market volatility through the 'Merit Order Effect,' where low-operating-cost renewables displace expensive natural gas generation. An IMF study from 2014-21 indicated that every 1% increase in renewables led to a 0.6% reduction in wholesale electricity prices in Europe. Additionally, new onshore wind and solar projects are 40% cheaper than new coal and gas plants.
• Improving energy efficiency in buildings is a low-cost, rapid method to reduce energy demand and costs. In Europe, where buildings are responsible for one-third of CO2 emissions, ambitious retrofit policies could pay for themselves in under two years. Simple changes, such as adopting more efficient thermostats, could save EU citizens up to EUR 12 billion in energy bills.
• Heat pumps provide a more efficient and cheaper alternative to gas boilers. In the UK, they could save households up to 27% on heating bills; in Europe, they could save households USD 900 annually given current gas prices. Combining heat pump installation with building renovation could halve the average European heating bill by 2050 and reduce European gas import spending by EUR 15 billion by 2030.
• Transitioning from internal combustion engines to electric vehicles (EVs) and active transport can reduce living costs and improve public health. Despite electricity price rises, EVs remain cheaper to run than combustion engines when using home chargers. Furthermore, if 30% of journeys in the EU were cycled instead of driven, citizens could save up to EUR 2.8 billion annually on fuel.
• Short-term government interventions, such as subsidies and price controls, are insufficient as they do not address underlying causes and may reduce incentives for energy efficiency. For example, a €9 monthly regional transport ticket in Germany in 2022 successfully reduced car use and CO2 emissions (by 1.8Mt), but long-term sustainability requires infrastructure investment in EV charging and cycle lanes.

APA

Team, Z. (2023). Climate action can address the cost of living crisis. Zero Carbon Analytics. https://zerocarbon-analytics.org/insights/briefings/climate-action-can-address-the-cost-of-living-crisis/

Chicago

Team, ZCA. Climate action can address the cost of living crisis. Zero Carbon Analytics, 2023. https://zerocarbon-analytics.org/insights/briefings/climate-action-can-address-the-cost-of-living-crisis/.

Wikipedia

{{cite report |last1=Team |first1=ZCA |title=Climate action can address the cost of living crisis |publisher=Zero Carbon Analytics |date=15 February 2023 |url=https://zerocarbon-analytics.org/insights/briefings/climate-action-can-address-the-cost-of-living-crisis/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{team2023climate, author = {Team, ZCA}, title = {{Climate action can address the cost of living crisis}}, institution = {Zero Carbon Analytics}, year = {2023}, month = feb, url = {https://zerocarbon-analytics.org/insights/briefings/climate-action-can-address-the-cost-of-living-crisis/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }