Energy poverty, development outcomes, and transition to green energy

Abstract

There is a close connection between energy and development outcomes. Therefore, energy constraints could adversely influence development outcomes. Consequently, building resilience to energy constraints could be one effective channel to improve development outcomes. This study analyses the effect of energy poverty, while considering the influence of green energy transition, on several development outcomes. Our approach delineates the short and long run dynamics of the net effects of energy poverty and renewable energy transition on development outcomes. First, as a direct effect, we find that energy poverty (renewable energy) has a negative (positive) effect on income, education, life expectancy, employment and mobile phone subscription and a positive (negative) effect on poverty, income inequality, sanitation risk and risk of drinking unsafe water. Conditioning the effect of energy poverty on renewable energy, we find that the transition to green energy partially compensates the adverse effects of energy poverty on the various development outcomes considered in this study. Further, we find that, for several of the development outcomes, the risk of inflated energy cost associated with renewable energy transitions in the short-term is likely to neutralise in the long run, except for income poverty and environmental risk factors. We discuss the policy implications.