European transition toward climate neutrality: Is renewable energy fueling energy poverty across Europe?

Abstract

The European Union (EU) embraced a fast-track transition toward renewable energy (RE) to achieve climate neutrality and make energy more affordable. However, in 2022 around 11.8% Europeans are still energy-poor. In the last 15 years, RE consumption across EU countries grew significantly, and income per capita also increased. Nevertheless, energy poverty (EP), which is usually linked to RE and income level, has not shown any meaningful decline. To investigate the impact of RE and governance quality on EP, this study utilized panel data from 27 EU countries from 2005 to 2018. Method-of-moments quantile regression was employed to explore the nexus. Next, the results show that RE at the early transition stage does not reduce EP. In contrast, RE promotes an energy price hike at the early transition stage, triggering more EP. However, when RE permeates the system and becomes a dominant energy supply source, it eventually helps reduce EP. Also, governance quality exerts a positive effect and reduces EP. The results further show that income per capita reduces EP, whereas electricity prices and unemployment rates promote EP.