Dr. Muireann Lynch:

I will find it challenging to complete my presentation within three minutes, but I will try to address the main points.

The appropriate measurement of fuel poverty is not a settled question in the literature. Generally there are three distinct definitions. The first considers a household to be experiencing fuel poverty if it spends more than a certain percentage, typically 10%, of its income net of housing costs on fuel. The second measurement considers modelled rather than actual spend. In other words, it looks at the expenditure on fuel that would be required for a certain level of warmth, taking into account household and dwelling characteristics. The third metric relies on self-reported subjective data and categorises a household as experiencing fuel poverty if it has difficulty in affording adequate heating or fuel. These definitions relate to thermal energy expenditure only and do not consider the cost of private or public transportation.

Choosing an appropriate measurement of fuel poverty from the three definitions to which I have referred is not straightforward for reasons that are, perhaps, best explained by means of a simple example. The figures used in the example are illustrative, rather than indicative of something that may happen. The Murphy household is a low income household that spends slightly less than 10% of its income net of housing costs on fuel. The Murphys live in a poorly insulated house and have a low efficiency gas boiler for central heating. They cannot afford one of the eleven indicators of basic deprivation - I have provided a full list of the indicators for the committee as an appendix to my statement - meaning that they are not considered to be experiencing basic deprivation. Let us assume carbon taxation is increased by a quantum such that the Murphys' energy bills will increase by €200 per year if they make no changes to their behaviour. The household includes a small baby and an elderly relative. As such, it will not cut back on heating costs but will, rather, continue to heat the house as normal. Instead, the Murphys cut back on social activities and put off replacing worn out furniture. In these circumstances, they would qualify as experiencing energy poverty under the first and second definitions but not the third, although they would qualify as experiencing basic deprivation.

In another scenario, let us assume instead that the Murphy family consist of a couple with teenagers. Instead of continuing to heat their house as normal, they respond to the increase in carbon taxation by switching off the heating in the mornings. They leave the house earlier and eat breakfast at work or school. They would not qualify as experiencing energy poverty under the first definition but would under the second and third. They would be considered to be experiencing basic deprivation because being unable to afford adequate heating is one of the criteria for basic deprivation.

We will assume the Murphys take out a loan of €2,000 from the credit union to invest in a new and more efficient boiler. In order to repay the loan at a rate of €21 per week, they cut back on social expenditure and put off replacing worn out furniture. In that circumstance, they would not qualify as experiencing fuel poverty under the first, second or third definitions but would qualify as experiencing basic deprivation. The point I am trying to make is that whether one is considered to be fuel poor depends on the definition chosen and the household's behaviour, but, no matter what definition is chosen, the household in these scenarios qualifies as being deprived.

I will skip over most of the research I was going to mention, but I draw attention to a paper by Dorothy Watson and Bertrand MaÌtre of the ESRI which considered these indicators of basic deprivation and data from Irish households and found that energy poverty was not a distinct type of deprivation, meaning that if a household is experiencing energy poverty, it is also experiencing poverty. Energy poverty is difficult to measure and the final determination of its extent and degree is highly sensitive to the definition chosen. The research is clear that if one combines carbon taxation with appropriate revenue recycling mechanisms, the entire initiative can become progressive and the poorest households are the greatest beneficiaries. We recommend that the committee try to target poverty, rather than energy poverty, as it is an appropriate metric and would ensure all households that might be affected by increases in carbon taxation would be covered. Recycling these revenues through the taxation and welfare system would, therefore, be an obvious way of protecting low income households.