Rising Energy Prices Risk Pushing Millions into Extreme Poverty

Rising energy prices are making households more vulnerable to energy poverty—particularly during the cold season. Individuals who suffer from energy poverty lack the resources needed to heat, cool, light, and power their appliances.^[0] According to a modelling study by an international group of scientists published in Nature Energy, the cost of energy for households globally could have increased by between 62.6% and 112.9% since Russia’s invasion of Ukraine.

The report, which is authored by experts from the Universities of Birmingham, Groningen and Maryland, as well as the Chinese Academy of Sciences, modeled the impact of rising prices on households in 116 countries.^[1] They found that household spending increased up to 4.8% on average, as coal and natural gas prices surged after Russia's invasion of Ukraine, adding to post-pandemic increases.^[2]

One of the report’s authors, Yuli Shan, a professor at the University of Birmingham, said: “High energy prices hit household finances in two ways: fuel price rises directly increase household energy bills, while energy inputs needed to produce goods and services push prices up for those products as well, and especially for food, which affects households indirectly.”^[3]

The researchers are appealing for aid to be given to vulnerable households during the crisis, as many of them require assistance to be able to purchase the necessities they need, particularly food.^[4] They also calculated the change in energy cost burden rates—additional energy costs in household total expenditure compared to pre-crisis levels.^[5] The authors found significant variation across and within different countries, determined by household consumption patterns and the fossil fuel dependency of global supply chains.^[4]

It has been estimated that an additional 78 to 141 million people could be driven into extreme poverty on a global scale as a consequence.^[3] In certain nations in sub-Saharan Africa, the household energy expenses rose up to three times the global mean.^[0] Rwanda, located in East Africa, has experienced a 11.1% rise in its overall energy cost, which is three times higher than the worldwide average of 3.2%.^[1]

The authors argue that understanding how global energy prices are transmitted to households through global supply chains and who is more affected is crucial for effective and equitable policy design.^[4] The significant amount of uncertainty is due to the fact that a large portion of the rise in household spending is for indirect energy consumption – energy used to create the products or food that we consume.^[6]

0. “Russia—Ukraine war has nearly doubled household energy costs worldwide — new study” Down To Earth Magazine, 14 Feb. 2023, https://www.downtoearth.org.in/blog/energy/russia-ukraine-war-has-nearly-doubled-household-energy-costs-worldwide-new-study-87765

1. “Russia's war on Ukraine could push millions into extreme poverty, study shows” Daily Mail, 16 Feb. 2023, https://www.dailymail.co.uk/sciencetech/article-11758155/Russias-war-Ukraine-push-millions-extreme-poverty-study-shows.html

2. “Soaring energy costs could push 141 million into extreme poverty, report says” CNN, 17 Feb. 2023, https://www.cnn.com/2023/02/17/energy/energy-costs-ukraine-war-millions-poverty-report-intl-hnk/index.html

3. “Soaring fuel bills may push 141m more into extreme poverty globally – study” The Guardian, 16 Feb. 2023, https://www.theguardian.com/society/2023/feb/16/soaring-fuel-bills-may-push-141m-more-into-extreme-poverty-globally-study

4. “First Coronavirus, Now Energy Crisis Drives Millions Into Extreme Poverty” Revyuh, 16 Feb. 2023, https://www.revyuh.com/top-news/featured/first-coronavirus-now-energy-crisis-drives-millions-into-extreme-poverty/

5. “Burden of the global energy price crisis on households” Nature.com, 16 Feb. 2023, https://www.nature.com/articles/s41560-023-01209-8

6. “Russia–Ukraine war has nearly doubled household energy costs worldwide – new study” The Conversation, 16 Feb. 2023, https://theconversation.com/russia-ukraine-war-has-nearly-doubled-household-energy-costs-worldwide-new-study-200104