Fuel poverty in Hungary: research report released

Fuel poverty is an important issue for Hungary from several perspectives – it is estimated that this problem causes approximately 1500-2500 deaths in Hungary – but the topic was not widely researched in the past. On the initiative of the Center for Climate Change and Sustainable Energy Policy (3CSEP) of Central European University (CEU), and the Hungarian NGO Védegylet (Protect the Future), in cooperation with the Environmental Justice Working Group of Védegylet (Védegylet Környezeti Igazságosság Munkacsoport) some noteworthy research results have now been released.

Magyar nyelvű változat itt elérhető / Hungarian-language version available here

The price of natural gas has significantly increased in recent years, but the prices of other fuels have risen faster than inflation rates as well. This is worrying since according to surveys 80% of Hungarians spend more than 10% of their income on paying their energy bills. This is considered the international threshold for "fuel poverty".

Fuel poverty exists if people are unable to heat their homes to an acceptable level or can’t afford adequate energy services. At least 1.5 million Hungarians declare that they are suffering from fuel poverty. 15% of the Hungarian population state that they are unable to heat their homes to the required level, which is the sixth largest proportion in Europe. Hungary also has Europe’s highest share of customers chronically in arrears with their utility bills, at 18% of all households.

Natural gas is used for heating in 70% of Hungarian households. In recent years the government has been spending substantially on gas price and district heating subsidies. However, these direct energy subsidies have detrimental side effects: On the one hand, the significant amount of some 100 billion forints per year could have been spent on improving energy efficiency instead, which would also be a way to help eradicate fuel poverty. On the other hand, fuel subsidies are sending the wrong message to citizens, since they are not motivating them to save energy and improve their energy efficiency. It is also important to note that the current gas price subsidies don’t help the poorest: very poor countryside dwellers are using other fuels, which receive far less state support.

The specific energy consumption per square meter of Hungarian dwellings is the third highest in the European Union. Hungary is the only EU member state where the heating energy efficiency index deteriorated in recent years. About 25% of Hungarian dwellings suffer from damp walls, mould and leaking, which is the fifth largest share in Europe. The solution is therefore not to directly subsidize fuel prices but to improve the weak quality and low energy efficiency of buildings. It is essential to provide more significant funding for this through an adequate incentive system. Support for poor families to meet their energy needs is important, but it is also necessary to move more and more away from energy cost subsidies towards supporting investments in energy efficiency.

Recommendations of the research:

  • Energy efficiency investments must be increased. Taking into account the weak condition of the Hungarian building stock, the country’s dependency on fuel imports, as well as environmental challenges, investing in energy efficiency is clearly beneficial from social, economic, environmental perspectives and the energy security point of view, besides its positive employment effects. Energy efficiency investments should be encouraged through direct subsidies and state-supported loan schemes.
  • Price subsidies must be lowered and better targeted. Last year approximately half of the flats heated by natural gas or district heating received energy cost subsidies. It turned out that subsidies were claimed unlawfully in about every fourth case. At the same time, the administration of these subsidies costs almost as much as the government spends on energy efficiency investments (without the panel building programs). The current system is thus very expensive but inefficient. The fuel subsidies need to be slowly phased out while the system is being transformed.
  • The district heating system needs to be modernized. While district heating is globally considered the cheapest and most environmentally-friendly heating method, in Hungary it is expensive and wasteful. The billions spent on subsidizing district heating should be invested in modernization of the district heating system instead.

Full research results are available in English and Hungarian on the project webpage.