WHY FUEL POVERTY?

The National Health Service (NHS) in UK prescribes 21 degrees C in the living room and 18 degrees C in other rooms for all households but for more than 7.7 percent households cost of heating is above 10 percent of their income and they suffered from coldness related diseases and are in fuel poverty. Raising growth rates of income of vulnerable households, stabilising prices of fuel products and improving fuel efficiency of houses are measure to eliminate fuel poverty and to reduce the excess deaths caused by this. This paper shows how the basic needs of fuel demand can be modelled using the Stone-Geary preferences and how the growth of the economy is related to those preferences and technology of firms over time is analysed with Bellman-Sargent dynamic programming models. Demand and supply analysis of this kind should complement DTI's methodology on fuel poverty for policy analysis.