The Causal Effect of Drought on Energy Poverty: Evidence from Panel Data

We use nationally representative panel data from rural areas and small towns in Ethiopia, matched with fine‑resolution weather data, to investigate the impact of drought on energy poverty. Energy poverty is measured using the Multidimensional Energy Poverty Index (MEPI) and a multidimensional poverty status indicator. Fixed‑effects regression estimates show that experiencing drought in the previous production year increases a household’s MEPI score by 0.019 points and raises the probability of being multidimensionally energy poor by 3.8%. We further demonstrate that the primary pathway through which drought affects energy poverty is through its adverse effect on per‑capita income: experiencing drought in the previous production period reduces per‑capita income by 33.7%. In contrast, we find that the energy poverty of households participating in Ethiopia’s major safety‑net intervention—the Productive Safety Net Program (PSNP)—is not significantly affected by drought, suggesting that the program effectively buffers participants from these shocks. Overall, our findings contribute to the growing literature on the economic costs of drought and underscore the critical role of well‑targeted safety‑net programs in mitigating climate‑related vulnerabilities.