Stanislas Jourdan and Sebastian Mang from the New Economics Foundation write on the Euractiv website about the benefits from social leasing. Low-income households are the most exposed to energy price shocks and the least able to access technologies that would protect them. The authors argue that a social lease turns the financing equation around.
Europe needs green tech more than ever; France shows social leasing is the way forward
Energy has been the main driver of Europe’s biggest inflation crises – the 1973 oil shock, the 2022 gas crisis, the price surge we are all witnessing today. Each one is triggered by volatile global fossil fuel markets, each driving up household bills and resulting in massive profits for fossil fuel companies.
As European governments look for answers to the painful effects of high energy prices for consumers and businesses, the temptation is to soften the blow to consumers with tax cuts on energy and other costly emergency measures. This was the strategy followed in 2022-23, resulting in €540bn being spent to relieve the pain. Government debt rose, in many cases simply to subsidise the very fossil fuels that had caused the inflation pain in the first place. Meanwhile, our efforts to move away from fossil fuels have been slow and poorly designed, prompting public cynicism towards the green transition.
The EU can do better to support people while also making our economy more resilient. A bright spark in an otherwise uninspiring policy landscape has been the rise of social leasing programmes for green tech. Such programmes are some of the very few ways that governments have been helping ordinary households access the benefits of the transition and permanently reduce fossil fuel demand.
In 2023, France launched a social leasing scheme offering electric vehicles to low- and middle-income households for only €49-150 a month. The economics are straightforward: the state subsidises the upfront cost, removing the main barrier to adoption. Since EVs are cheaper to run than petrol and diesel cars, customers save on overall monthly expenses.
France’s scheme includes several safeguards. Eligibility is targeted at low- and middle-income households who depend on their car for work. Monthly lease payments are capped, and environmental standards effectively exclude SUVs.
Unsurprisingly, 55% of applicants were from rural areas – precisely the people most exposed to fuel price increases and generally more sceptical that the transition would deliver for them.
The programme cost €370 million a year. Just last week, the government announced its ambition to double the programme size to 100,000 vehicles, with priority to the most car-dependent workers, such as homecare nurses.
The potential for scaling up this model at EU level is immense. Analysis shows that by allocating just half of the €86.7 billion Social Climate Fund to social leasing, the EU could fund over 8.6 million EV contracts across the continent, replacing nearly 10% of the EU’s total car fleet.
The return to households from the EU’s investment could be amplified by negotiating bulk-purchase discounts from manufacturers. We have already seen this happen in the UK’s Motability scheme, which has delivered around a 45% reduction in the net cost of car ownership.
But the potential goes beyond electric vehicles. The upfront cost is also the main barrier preventing low- and middle-income households from accessing solar panels, home batteries and heat pumps. A social leasing programme spanning all four would allow governments to drive down fossil fuel demand in transport, heating and power simultaneously.
New electric vehicles are realistically accessible only to the wealthiest 30% of households in France. Heat pumps cost between €8,000 and €10,000 even after subsidies, while only the top fifth of households can fund deep renovations from savings. Clean tech, and the cost savings associated, are currently a product for the wealthy.
Social leasing could become a key component to reconcile an ambitious Europe’s industrial policy with the promise of a fair transition for all. Local content requirements would turn household adoption into a manufacturing stimulus. Heat pumps are already 73% European-made. European factories already have the capacity to produce twice as many electric vehicles as the current domestic demand, but lack reliable demand. A social leasing programme would provide exactly that.
Low- and middle-income households are the most exposed to energy price shocks and the least able to access the technologies that would protect them. A social lease turns the financing equation around, bringing the benefits of clean technologies upfront, while smoothing out the financial cost over time.
France’s experience shows there is enormous demand for exactly this. When the scheme launched, it was oversubscribed in six weeks. A European programme built on the same logic would not only be popular, but also one of the most tangible things Brussels has done for household budgets, while providing a real sense that the energy transition – and the EU – are working in their favour.
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Energy in Demand - Sustainable Energy - Rod Janssen 