Extreme precipitation, energy poverty and the moderating effects of digital inclusive finance: Evidence from China's householders

Abstract

We present the first empirical study investigating the aggravation of household energy poverty due to extreme precipitation, utilizing household survey data in China spanning 2016 to 2020. Furthermore, we evaluate the moderating role of digital inclusive finance as a policy tool in mitigating this association. On days with extreme precipitation, compared to sunny days, households are 2 % more likely to experience energy poverty, with their energy consumption ratio rising by 0.44 %. Chinese households incur an additional 33 % in energy costs on days with extreme precipitation. After considering the households' adaptation to climate change, the conclusion remains robust. Additionally, we demonstrate seasonal effects, highlighting that unusually severe summer precipitation exerts the most significant impact. Socially disadvantaged groups are disproportionately vulnerable to energy poverty caused by extreme precipitation. For influence mechanisms, extreme precipitation exacerbates energy poverty by incrementing energy expenditure and decreasing household income. Families may cope with the effects of extreme precipitation by repairing their houses as a kind of defensive behaviour. Finally, we find that the development of digital inclusive finance significantly reduces households' probability of falling into energy poverty because of extreme precipitation. The moderating impact of digital inclusive finance is primarily influenced by the depth of development and the escalating level of digitization. Merely expanding the coverage of digital financial inclusion is insufficient to effectively exert its moderating impact. These findings are crucial for understanding the adverse effects of extreme precipitation on SDGs and the role of inclusive finance as a policy tool in poverty alleviation.