ISETS Working Papers

ISETS Working Paper No. 22-0002

Who suffers from energy poverty in household energy transition? Evidence from clean heating program in rural China

Lunyu Xie, Xian Hu, Xinyi Zhang, Xiao-Bing Zhang

Abstract: It can be challenging to provide energy that is both clean and affordable. In northern rural China, a household clean heating program has been adopted, requiring households to transition from coal to electricity and natural gas. This program led to an unintended sharp increase in the burden of heating cost for enrolled households, even with large subsidies. To investigate this policy-induced increase in energy poverty, we conducted a large-scale household survey in northern China. We find that energy poverty, measured in multiple dimensions, is significantly increased by replacing coal with electricity and gas, while it is decreased by replacement with clean coal. Econometric analysis shows that the change in energy poverty is heterogeneous in several ways. It remains stable in Beijing, but increases by 70 percent in the much less developed neighboring province of Hebei. Households with lower income, less education, and smaller household size are more likely to experience energy poverty. Those with lower income and no insulation for their houses are negatively affected to a larger degree. These findings provide empirical evidence that a mandatory “one policy for all” is likely to hurt low-income households more. It calls the attention of policy makers to the distributional effect when designing energy transition policies for a clean and low-carbon economy.