Demand-side management of energy consumption using energy efficiency improvements has the potential to reduce poverty in addition to reducing greenhouse emissions. However, very little is known about the impact of electrical energy consumption inefficiency on poverty.
Using data from a household survey and the Ordinary Least Square estimation technique, we first assess the impact of household electricity consumption efficiency on multidimensional poverty using a stochastic energy demand frontier model.
Next, we estimate the impact of electricity consumption efficiency on consumption poverty based on a probit model. The results show that a percentage increase in energy efficiency reduces multidimensional poverty by approximately 9.4 percentage points while for lower and upper consumption poverty, the probabilities reduce by approximately 10.2% and 14.3% respectively.
Male-headed households are more likely to experience poverty than female-headed households. Multidimensional poverty is reduced more for risk-taking households than risk-averse ones. However, being risk-neutral is not enough to reduce the probability of household consumption poverty. Education in both cases is found to significantly reduce the probability of being poor.
We recommend that government should encourage demand-side management of electricity through efficiency improvement options such as star ratings and appliance rebate systems and also increase awareness of energy efficiency as a way of addressing poverty.
Keywords: Households, Electricity Consumption, Efficiency, Environment, Poverty.