Energy poverty, temperature and climate change

Abstract

We examine the effect of temperature shocks on the proclivity to be in energy poverty and combine our estimates with simulated weather data to predict the effect of global warming on the incidence of energy poverty over the rest of the century. To do so, we match representative household panel data for Australia with weather data at a geographically localized level. We find that each additional ‘cold day’ (average temperature below 15 °C) increases the incidence of energy poverty by 0.01%–0.03%, compared to if the day had been in the comfortable temperature range (20-24 °C). We find that global warming can be expected to result in modest decreases in the extent of energy poverty in the short-medium and long-run. Most studies have emphasized the economic and social costs of climate change. Our findings are important in pointing to a specific outcome for which climate change may be beneficial for a large country with a relatively mild climate.