Looking beyond energy efficiency and the role of financial literacy in experiencing fuel poverty: Evidence from Irish homeowners

Abstract

Previous research has established that an effective way to fight fuel poverty is to increase levels of energy efficiency in residential buildings. A different strand of research has shown that the adoption of energy efficiency measures is more likely if people have high financial literacy. We combine these two strands of research by conducting a new survey among Irish homeowners and directly analysing the association between financial literacy and fuel poverty. Given that energy efficiency renovation is not always economically viable, we also investigate the drivers of other strategies to cope with high energy prices, such as switching the household’s energy supplier and using direct debit payments. While our results confirm that high energy efficiency is associated with lower fuel poverty, at least for some measures, we find no evidence of a link between people’s financial literacy and the energy efficiency level of their homes. We find only weak evidence of a direct negative association between financial literacy and fuel poverty. We investigate several related aspects of fuel poverty using our survey data. We find that low overall household income is strongly associated with a higher prevalence of subjective measures of fuel poverty, a lower likelihood to engage in some energy cost mitigation strategies, and the likelihood to see administrative challenges as insurmountable barriers in the retrofit process. Policy measures aiming to reduce fuel poverty or increase energy efficiency or financial literacy should therefore all focus on low-income households.