HomeFirst Coronavirus, Now Energy Crisis Drives Millions Into Extreme Poverty

First Coronavirus, Now Energy Crisis Drives Millions Into Extreme Poverty

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A new study shows that the conflict between Russia and Ukraine could cause energy prices to go up, which could push around 141 million more people around the world into extreme poverty.

The energy expenses of households for heating, cooling, and transportation have skyrocketed, and growing energy prices have pushed up the pricing of products and services.

According to experts, home energy expenses would likely increase by 62.6% to 112.9%, which will result in an increase in household spending of 2.7% to 4.8% and cost-of-living pressures that might drive 78 million to 141 million people into severe poverty.

Experts from the Universities of Birmingham, Groningen, and Maryland, in addition to the Chinese Academy of Sciences, modeled the effect of increased prices on consumers in 116 nations.

The researchers, who published their results today in Nature Energy, argue for targeted energy support to assist vulnerable families during the present crisis, emphasizing that many people would need assistance to buy basics, particularly food.

Household finances are impacted by high energy prices in two ways. Firstly, the direct effect of fuel price increases results in higher energy bills. Secondly, the energy required to produce goods and services also contributes to rising prices of products, particularly in the case of food, indirectly affecting households, according to corresponding author Yuli Shan.

“Due to the unequal distribution of income, surging energy prices will affect households in very different ways. Unaffordable costs of energy and other necessities will push vulnerable populations into energy poverty and even extreme poverty.

This unprecedented global energy crisis serves as a reminder that a fossil fuel-intensive energy system increases the danger to energy security and speeds up climate change.

Researchers figured out the change in energy cost burden rates, which are the extra costs of energy in a household’s total spending compared to levels before the crisis. They discovered substantial heterogeneity between and within nations, which was dictated by family consumption patterns and the dependence of global supply networks on fossil fuels.

The specialists discovered that in high-income nations, the burden rates of energy prices are greater for low-income families, and vice versa in low-income ones. In terms of the burden rate of overall energy costs, households in Sub-Saharan African nations are the most severely affected.

Globally, richer groups often have greater energy prices for high-value-added items and services, but poorer families typically pay more on basic necessities like food and direct energy.

“Understanding how global energy prices are transmitted to households through global supply chains and who is more affected is crucial for effective and equitable policy design,” remarks corresponding author Kaus Hubacek.

“This crisis is worsening energy poverty and extreme poverty worldwide. For poor countries, living costs undermine their hard-won gains in energy access and poverty alleviation. Ensuring access to affordable energy and other necessities is a priority for those countries, but short-term policies addressing the cost-of-living crisis must align with climate mitigation goals and other long-term sustainable development commitments.“

The war between Russia and Ukraine has been a major shock to the energy markets since late February 2022. Several causes, including the continuing war, a quick global economic recovery post-pandemic, a heavy dependence on fossil fuels, and a severe imbalance between energy demand and supply, have contributed to the rise in global energy costs.

Russia is a significant supplier of natural gas and oil, which means that nations who depend on importing these fuels from Russia risk historic fuel supply problems. Emerging countries are simultaneously suffering from high gasoline import prices and a lack of fuel.

Several economies have entered recession as a result of the global cost-of-living problem, which has also led to rising inflation and severe cost-of-living pressures on people everywhere.

Source: 10.1038/s41560-023-01209-8

Image Credit: Getty

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