Industrial Energy Efficiency Versus Energy Poverty in the European Union: Macroeconomic and Social Relationships

Abstract

This paper examines the impact of industrial energy efficiency on household energy poverty in the twenty-seven Member States of the European Union for the period 2003–2023. Although the literature has widely discussed energy efficiency as an enabler of decarbonisation and economic performance, its direct link to energy poverty at the macro level has rarely been analysed, let alone with respect to structural changes in industry. Filling this gap, this paper evaluates whether reductions in industrial energy intensity result in reduced energy poverty, understood as the share of households unable to maintain adequate indoor thermal comfort. Empirical analysis relies on a balanced panel dataset and uses fixed-effects regression models to take into account unobserved country-specific and time-specific heterogeneity. In addition, potential endogeneity between industrial energy intensity and labour productivity is addressed by the instrumental variable approach using two-stage least squares. The main models also include key macroeconomic and social control variables: real GDP per capita, social benefit expenditure, electricity prices for households, and unit labour costs. The results yield a robust and statistically significant positive link between industrial energy intensity and energy poverty, suggesting that efficiency improvements in industry make a quantifiable difference in household energy deprivation. This effect even increases in strength after the correction for endogeneity, thereby corroborating the causal relevance of productivity-driven efficiency gains. The findings also show substantial heterogeneity between EU Member States, indicating that national structural features will determine baseline levels of energy poverty. However, no strong evidence is found for an indirect price-mediated transmission mechanism or for moderation effects bound to income levels or social expenditure. This study provides sound empirical evidence that industrial energy efficiency is an important but structurally conditioned lever to alleviate energy poverty in the European Union. The results emphasise the integration of industrial efficiency policies with social and institutional frameworks while designing strategies for a just and inclusive energy transition.