Energy Poverty in the EU: Threshold Effects of Income Inequality on Price Responsiveness

Abstract This study investigates how income inequality conditions the effectiveness of energy pricing policies in reducing energy poverty across 24 EU member states from 2015–2023. Using a panel fixed-effects threshold model, we identify a critical Gini coefficient threshold beyond which the responsiveness of energy consumption to price increases significantly diminishes. Our findings reveal that in high-inequality contexts, traditional price-based energy policies become less effective because of constrained consumption flexibility among low-income households. This research makes a novel contribution to the literature by empirically demonstrating the nonlinear, threshold-dependent relationship between inequality and policy efficacy. By moving beyond linear assumptions, the study enhances the theoretical understanding and informs the design of more equitable and effective energy poverty interventions. The results underscore the need for integrated policy frameworks that couple pricing mechanisms with structural inequality-reduction strategies to ensure a just and sustainable energy transition. JEL Codes: D63, Q48, C23