Energy poverty and income inequality: An economic analysis of 37 countries

Abstract

Identifying those who are vulnerable to energy poverty is important to sustainable development, for which vulnerability is known as the inability to access an adequate level of energy services in the home. Although many studies have investigated the determinants of energy poverty at the household level, none has examined how these determinants can change according to a country’s economic situation. We use original survey data of 37 countries at various economic levels to address this issue by creating objective and subjective indicators in three dimensions: accessibility, reliability, and affordability. We employ a three-level hierarchical model to investigate how a country’s economic development level and income inequality, as well as household-level socioeconomic factors, affect households’ energy poverty. We find that energy poverty for country-average households shows an improving trend with economic development in the accessibility and reliability dimensions, while affordability is the worst in countries with a middle level of economic development and greater income inequality. Although it is well known that low household income is linked to worse energy poverty in affordability dimension, our findings add new insight that a higher economic development level and larger income inequality are the most relevant factors in the strong negative association, not climate conditions. We reveal that in addition to country-level factors, several household-level socioeconomic factors are associated with energy poverty in different ways depending on the dimension, which implies that customized criteria are necessary to define vulnerable households in each dimension.