Who bears the energy cost? Local income deprivation and the household energy efficiency gap

In recent years, economists and policymakers have increasingly focused their attention on improving the energy efficiency of households due to its ability to simultaneously meet affordability, energy security, and climate goals. However, despite such efforts, recent empirical evidence has shown that the magnitude of the so-called energy efficiency gap has remained largely persistent and disparate across England over the last decade. In this paper, we investigate the association between local income deprivation and households’ energy efficiency gap. We use pooled cross-section local super output area level dwelling data from England for three years of observations: 2010, 2015, and 2019. After accounting for several dwelling-specific controls and unobserved heterogeneity at the local district and year level, we find that a one standard deviation increase in local income deprivation is associated with a 1.2 kWh/m per year increase in the energy efficiency gap. Our paper sheds light on the association between local income deprivation and the regional persistence of the households’ energy efficiency gap in England and calls for greater place-based policy interventions targeting households in the most income-deprived communities.