Targeting household energy assistance

Governments face considerable challenges in ensuring that public funds for energy assistance programs are allocated to households with the greatest need of assistance. The difficulty relates to the complexity of household energy challenges with their many contributing causes, which contrasts with the need for policy approaches to have relatively simple criteria to be feasible. We use a multiple-indicator approach to define energy poverty and develop methods from the literature on income poverty to analyse energy poverty according to its incidence, intensity, and inequality. We show that common approaches to targeting based on income or welfare status result in high diversion of public funds to households that do not experience major energy stress. Alternatively, setting wealth thresholds or targeting only some categories of welfare recipients could more consistently identify households that face energy poverty.