ESRI Working Paper No. 746 - February 2023 - Equity effects of energy affordability

We identify that both policies have equal distributional effects if (i) the price cap extends to subsistence units of consumption only, or (ii); the price cap and lump sum transfer have an equal effect on the affordability of subsistence consumption. [...] The ratio of the indirect utilities of households i and(j is:)γ( ) Ui ϕj ϕiw(1− t0 − tc − tL)− E0(pE − ψ) + Li = (9) Uj ϕi ϕjw(1− t0 − tc − tL)− E0(pE − ψ) + Lj We denote the following utility ratios: (UBP/UBPi j ) is the utility ratio before policy intervention; (UCi /U C j ) the price cap utility ratio; and (U L/ULi j ) the lump sum transfer utility ratio. [...] By inserting the expressions for A and B, we get B tc ψ = < (22) A (1− t0) pE For a revenue-neutral policy interventio∑n, the sum of all lump sum revenues must equal the sum of all tax surcharges: tcw i ϕi(1− li) = ETψ. [...] The views expressed in this paper are those of the authors alone and do not represent the official views of the Department of Finance, Revenue Commissioners or the ESRI. [...] The views expressed in this paper are those of the authors alone and do not represent the official views of the Department of Finance, Revenue Commissioners or the ESRI.