Energy poverty severity assessment and identification of vulnerable households in South Korea

Rising energy prices and accelerating climate change have intensified the “heat or eat” dilemma faced by low-income households. Traditional binary indicators classify households simply as energy-poor or not energy-poor, but they fail to capture the depth and severity of this deprivation. To address this limitation, this study develops a continuous Energy Poverty Index (EPI) that quantifies poverty severity and the actual livelihood constraints experienced by households. By incorporating a modified Engel coefficient, the EPI reflects how energy burdens crowd out spending on essential needs such as food, housing, and health. Using Statistics Korea household survey data from 1998 to 2022, the empirical analysis demonstrates that the EPI has strong temporal stability and greater targeting precision than conventional indicators. Because it measures severity at the individual household level, the EPI enables severity-weighted subsidy allocation rather than uniform payments. Notably, the index successfully identifies hidden high-risk households that report low nominal energy expenditures but experience extreme and overlapping vulnerabilities that binary measures overlook. These findings support a paradigm shift in energy welfare policy from uniform, undifferentiated payments to severity-based, differential support. By comprehensively capturing how energy burdens compromise essential needs, the EPI offers a practical tool for designing more equitable and climate-resilient energy assistance programs nationwide.