Energy Consumption and Poverty in Italy: a New Microsimulation Model

This paper assesses the distributional effects of energy price increases and the mitigation policies implemented by the Italian government between 2021 and 2022. The analysis highlights how households have been impacted by energy price volatility and evaluates the effectiveness of government interventions in alleviating financial strain on households. The paper fills a gap in the literature by providing an estimation of the High Share of Energy Expenditure in Disposable Income Indicator, which was unavailable for Italy due to the lack of data, and which may contribute to providing a picture of energy poverty in an European Union perspective. Findings indicate that, in the absence of policies, the increase in households’ expenditure would have been dramatic and that energy poverty would have increased. However, policies were effective in reducing energy poverty with respect to a scenario without policies and to offset the increase in energy expenditure between 2019 and 2022, with low-income households benefiting particularly from means-tested targeted policy. This research contributes to the understanding of energy poverty and offers insights into the effectiveness of policy measures in addressing economic inequalities exacerbated by inflationary pressures.