Warmer temperatures and energy poverty: Evidence from Chinese households

Abstract

We estimate the casual effect of warmer temperatures on energy poverty in China using a nationally representative household survey from 2014 to 2018. Exploiting daily mean temperatures over the 12 months preceding the interview, we find that warmer temperatures increase energy poverty at the intensive and extensive margins. We find evidence of seasonal effects and that it is unusually warmer springs, rather than hotter summers, that are responsible for our results. We decompose the energy poverty result into the effect of temperature on energy expenditure and the effect of temperature on income. Our results suggest that both channels operate via heat stress, but not cold stress, and that the income channel is relatively more important. We show that one reason why warmer temperatures increase expenditure on energy is that on hotter days households shift leisure activities inside in order to cope with heat stress; hence, consuming more energy.