Assessing Impacts of the EU ETS 2 and Direct Compensations for Households in Czechia: A Linked E3ME-DASMOD Microsimulation

Energy poverty indicators were built to describe who is energy poor, yet they are increasingly used to judge policy; the European Commission pays Social Climate Fund support only as Member States reach targets that include fewer households in energy poverty. We show these indicators can record a payment that relieved households as almost no improvement, and count the savings a retrofit draws as deprivation. We build a dynamic microsimulation model of Czech households (DASMOD) to evaluate the distributional impacts of a public programme that either supports energy-efficiency investments in home insulation, heat pumps, or both, or mitigates adverse social impacts by direct lump-sum compensations. Construction matters as much as policy: a cost condition stated as a level of spending gives back 87 percent of a lump sum’s relief as induced spending; one stated as a share of income records it as an improvement; an asset screen counts saved payments as relief. Building programmes lower low-income high-cost indicators without an asset screen by 7.1 to 10.5 percent, more than the targeted lump sum by resolved margins, and their effect outlasts the payments; official headcounts barely move. Evaluations should fix thresholds in advance and report several indicators with their precision.