Is energy aid a panacea for energy poverty? Evidence from developing countries

Abstract

Energy poverty remains a critical barrier to sustainable development in the 21st century, particularly in developing countries. Energy aid, which includes financial assistance, technology transfer, and policy cooperation from developed nations and international organizations, has been increasingly utilized to alleviate energy poverty. However, the effectiveness of energy aid in reducing energy poverty and the mechanisms through which it operates remain underexplored. This study employs a panel dataset covering 48 developing countries from 2010 to 2019 to empirically examine the impact of energy aid on energy poverty. Using the system generalized method of moments (SYS-GMM) approach, the findings confirm that energy aid significantly reduces energy poverty. Moreover, the study identifies two key mechanisms: (1) energy aid promotes energy structure upgrading, facilitating the transition to cleaner energy sources and improving energy accessibility and affordability; and (2) governance quality plays a crucial moderating role, enhancing the efficiency and effectiveness of energy aid utilization. Further heterogeneity analysis reveals that the impact of energy aid varies by income level, population density, and the severity of energy poverty, with aid being more effective in higher-income and lower-density regions. These findings offer useful guidance for policymakers, highlighting the need for well-planned energy aid programs, stronger governance, and better energy infrastructure to ensure fair and lasting energy access.