Analysing Gordon’s trade-off by adapting Thurow’s approach of pure public good to the German energy sector

Abstract

Background: We analyse Gordon’s trade-off by adapting Thurow’s approach of pure public good using the example of the German energy sector which is in a transition process to a low-carbon sustainable energy system (Energiewende). The income distribution and the energy expenditures of households are interpreted as public goods. Their distribution is measured with the Atkinson index, which determines how the quality of life, as measured in income and energy expenditures, is distributed among society. Methods: We use the disaggregated consumption and income for 39.409 million German households. Our socio-economic analysis focuses on six household types. Results: Our analysis shows that among German households, energy expenditures are more equally distributed than private consumption in general and income. The rather (but by far not completely) equal distribution of energy expenditures confirms Smil’s finding that energy is the universal currency (Sen, On Economic Inequality, 1973) for people’s welfare and can be seen as an indicator of the basic needs of households irrespective of household income. Nevertheless, low-income households have to spend a higher share of their income on energy to avoid energy poverty. Further price increases could lead to an unequal distribution and rising energy poverty. Conclusions: The socio‐economic conditions of society and its energy sector have to be addressed in a transition processes. Energy poverty constitutes an infringement of the sustainability concept. If society does not take distributional effects into account, the transition process itself could be jeopardized.