Household electricity three times more expensive than upcoming ‘eco-friendly’ aviation e-fuels, study reveals

(Press-News.org) Existing tax policies during the energy transition from fossil fuels to renewable sources will lead to major energy injustices and skewed priorities, new research published in Climate Policy shows.

The peer-reviewed study found that electricity serving primary needs, such as heating or lighting, ultimately costs three times more than electricity for tertiary needs such as long-distance mobility – mostly due to taxation policies.

Further highlighting the ongoing social inequalities of fuel and related policies, the findings also demonstrate within the European Union (EU), the wealthiest 1% of all its population is responsible for 66% of the distance currently travelled by air. In fact, air travel is almost non-existent for 50%, and even quite limited for 90% of EU citizens the paper shows.

This 90% of people, therefore, emit less than 0.1 ton of CO2 equivalent emissions per person, per year. Meanwhile the top 1% emit more than 22 tons per person/year.

Dr Jean-Baptiste Jarin, from the TREE laboratory (Energy and Environment Transitions) at the University of Pau and Pays de l’Adour, who carried out the research, used France as an example of current and future electricity use as a basis for similar countries worldwide – especially across Europe.
And although based on EU regulations applied to France, the methodology and conclusions of this study can be transposed to other countries, and to other energy carriers based on electricity, such as hydrogen.

To evaluate the impacts of these electricity tax schemes and final prices, he collected data on electricity consumption for primary (household), secondary (electric vehicle local mobility) and tertiary (e-fuel long distance mobility) needs, and then compared electricity prices, before and after taxation.

Results demonstrate:

Electricity serving household and local mobility needs cost 194 €/Mwh (euros per megawatt-hour). This was three times more than e-fuel (synthetic sustainable aviation fuels, that are renewable jet fuels produced from fossil-free electricity and recycled carbon dioxide) for aviation – 65.5 €/Mwh. Tax policies accounted for 120 €/Mwh of this cost in the case of household and local mobility fuel needs but only 11.2 €/Mwh in the case of aviation. Electro-intensive facilities that produce aviation e-fuel benefit from little or no taxation, and jet fuel is also untaxed. A round trip by air between Paris and New York for one person, when using this low carbon (which is designed to be more eco-friendly) e-fuel, still requires 7,300 kWh – exceeding the total annual primary and secondary needs (5,000 kWh) of an individual. The European Union recently introduced the obligation to incorporate e-fuels for aviation as soon as 2030. In the UK, this obligation is as soon as 2028; in-line with its Renewable Transport Fuel Obligations Order 2024.

Dr Jarin has 25 years of experience in the aviation industry, prior to his career in academia. He recommends to key policymakers that ahead of any transformational policies and strategies, aimed at achieving low emissions in aviation, provisions should be made to “not interfere with energy justice”.

Additionally, he indicates that future taxation rates should become proportional to the final purpose of the energy, and this principle should be a “pillar of energy justice”.

Commenting, Dr Jarin says: “As e-fuel, along with other energy carriers based on electricity, is still within its infancy, it’s time for policy-makers to address the potential social injustices which may arise when formulating e-fuel policies.

“Electricity for basic needs such as heating or cooking benefits everyone but using it for air mobility mostly benefits the upper classes. Taxation rates should be proportional to the final purpose of the energy, and policies should drive not only production but also consumption, within a distributive justice perspective.”

Dr Jarin adds: “And that is what I find most worrying about the findings from within my paper, that, essentially, low carbon policies could foster energy injustice to people across society.

“Sadly, a massive production of e-fuel – especially when dedicated to aviation – could mean that tax inequalities, along with volume inequalities, spread the gap between the very wealthiest and the rest. That is why policy makers need to pay close attention.

“I feel that most people perhaps do not yet understand that energy, and therefore electricity, especially when low carbon, is not gifted!

“In the Global South, but also within the EU, during winters of 2022 and 2023, electricity bills were so high in most EU countries that people had to – and even were asked to by some – reduce heating and other appliances consumptions.”

Limitations of the paper include that while all EU countries follow the same tax directive on energies, the focus is limited to France and since electricity prices in Europe vary for each country, the results, when expressed in €/MWh, could be slightly different.

Also, carbon tax and redistribution mechanisms are not addressed in this study, and “where to tax within the value chain remains an important issue,” Dr Jarin adds.

“This,” Dr Jarin says, “is a particularly important issue as low carbon electricity with high load factor is a must to produce e-fuel.

“As such, the EU has significant assets to become a potential producer, rather than a potential importer.”

END