Chimney stackBillions raised from carbon taxes should be used to lift millions of households out of fuel poverty, a coalition of charities and businesses has urged.

Research for the "energy bill revolution" campaign suggests 6.4 million households are in fuel poverty in the UK, forced to spend more than a tenth of their income on bills to keep their houses warm.

Based on projections for costs of gas and take-up of Government policies to improve energy efficiency of homes, the study warned the number of households in fuel poverty could rise by 40% to 9.1 million by 2016. This would mean one in three homes was suffering from fuel poverty in the year the Government had set as a target to eradicate the problem.

However, revenues from carbon taxes are expected to raise £4 billion a year over the next 15 years - money which could be used to lift 87% of suffering homes out of fuel poverty and make the rest as efficient as houses being built today.

The study by energy efficiency experts Camco suggests the funding could allow 600,000 homes a year to receive grants averaging £6,500 to install insulation and take other steps to make them more efficient. The move could create 30,000 to 50,000 new jobs directly, and up to 200,000 in the wider economy, cut £310 from household bills, and deliver up to four times the carbon reductions of the Government's planned energy efficiency programmes.

The Government's flagship "green deal" scheme, which will cover the upfront costs of energy efficiency measures with the money paid back from savings on bills, is likely only to be taken up by around 100,000 households a year, the report said. And the "ECO" scheme, which requires energy companies to install efficiency measures in hard-to-treat homes or vulnerable households, is likely to improve 260,000 homes a year.

The report warns that the number of homes taking up the schemes represents a reduction in households being fitted with basic energy efficiency measures and will not deliver the carbon reductions needed to help meet the UK's legal climate change targets for the 2020s.

Money raised from the emissions trading scheme, which requires energy generators and heavy industry to buy permits for pollution, and the carbon price floor, which puts a minimum price on the permits, could be used just for grants to tackle fuel poverty or be split between fuel poor homes and topping up green deal funds.

Ed Matthew, director of Transform UK, which co-funded the report with the Co-operative Group and Consumer Focus, said: "More people die every year in the UK from living in a cold home than die on our roads. Millions more struggle to make ends meet in the face of high energy bills. This is nothing short of a national scandal. Recycling carbon tax revenue to make homes super energy efficient is a fair and permanent financial solution to end the suffering."

Their campaign already has the backing of a range of organisations and businesses including Asda, Ikea, Kingfisher, Save the Children, Islington Council, Greenpeace, Friends of the Earth, National Pensioners' Convention, Barnardo's and unions including the TUC, GMB and the Fire Brigade Union.