ESRI Working Paper

Are energy poverty metrics fit for purpose? An assessment using behavioural microsimulation

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May 28, 2020
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We assess the existing battery of metrics for measuring energy affordability. We analyse expenditure-based metrics and recently-developed metrics for multidimensional poverty under simulated scenarios which allow for the introduction of carbon taxation, increased housing costs, revenue re-allocation and increases in energy efficiency. We deploy the Exact Affine Stone Index (EASI) implicit Marshallian demand system to parameterise a microsimulation model. Expenditure-based metrics used by official bodies in Europe perform very poorly in capturing the impacts of both carbon taxation and policy responses. Multidimensional poverty metrics provide more intuitive results. Evidence from these metrics show that revenue recycling can mitigate the impacts of increased energy and housing costs in the extensive and intensive margins of energy poverty, while energy efficiency can exacerbate the intensity of those already classified as “energy poor”.