Brussels –Focus on climate change and climate policies: the effects of the former are uneven, and the latter, if not adequately supported by targeted measures, risk exacerbating disparities, inequalities, and poverty. This is the message in the European Central Bank’s analysis of climate-change-driven inequalities and why the EU should take them into account. Published on the Frankfurt-based institution’s blog, the analysis revisits the issue of the Directive on the energy performance of residential buildings, known as ‘green homes’, as a renewed call for effective legislation.
“Lower-income households may be particularly affected by climate-related risks, as they typically have less capacity to finance energy-efficiency investments,” the report highlights, while also noting that “climate transition policies can affect housing prices and rents if newly imposed energy-efficiency requirements put a premium on properties that already meet them.”
In essence, sustainability policies in the construction and housing sectors are likely to affect purchase and rental prices, to the detriment of those who find it most difficult to meet their mortgage payments and monthly housing costs. This calls for support measures, such as incentives, tax relief and subsidy schemes for the lowest-income groups.
“While some asymmetric effects may fade as households, firms and regions adapt, others could prove more long-lasting,” ECB analysts warn. Therefore, they insist, “without adequate policy support and investment, certain workers, sectors and regions may face persistent challenges in the face of climate risks and high transition costs.” Furthermore, “if the costs of the transition fall disproportionately on certain groups, public support for climate policies may weaken, increasing uncertainty and potentially slowing the transition itself.”
The crux of climate issues, the ECB stresses, is the uneven way the negative consequences of global warming are felt. Some regions are more severely affected than others by extreme weather events and economic repercussions. Similarly, the population is affected differently by the consequences of floods, droughts and even sustainability policies. The central bank also turns the spotlight again on inflation and the two main components that affect households: energy and food.
Food and energy prices “play an important role in shaping inflation expectations,” the ECB notes. Should the prices of these two commodities rise due to regulatory changes or adverse weather events, this would place a particular burden on low-income households. This situation could increase their credit risk and, should the price rises persist, reduce their spending on other goods and services. Furthermore, “higher food and energy costs may fuel higher wage demands, adding to inflationary pressures.” It is up to politicians to resolve all this.
English version by the Translation Service of Withub
