Assessing the impact of marketization on energy poverty

In conjunction with economic growth, improving the quality of life for its citizens is a central concern for the Chinese government. Energy poverty, a topic closely linked to people’s quality of life, has garnered global attention. This study examines the relationship between marketization and energy poverty by constructing provincial-level panel data using the fixed effect model. To address endogeneity, the instrumental variable method is further employed. The study obtains two major findings. First, the study reveals a significant upward trend in marketization in China in recent years, with a concomitant decrease in energy poverty. Here, the causal (and negative) effects of marketization on energy poverty are identified. Second, the mechanism analysis shows that this effect operates through (i) improvements in the quantity of energy supply (rather than energy supply efficiency), (ii) the accumulation of human capital that promotes the use of clean energy, and (iii) an increase in people’s income. This study makes three key contributions. First, it empirically analyzes the impact of marketization on energy poverty from a macro-perspective. Second, it systematically discusses the pathways through which marketization operates. Third, drawing on several theories, it provides a deeper understanding of the theoretical connection between marketization and energy poverty.