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Report on the welfare impact of energy compensations in Moldova in 2021-2024
Report on the welfare impact of energy compensations in Moldova in 2021-2024
February 18, 2025
Tackling energy vulnerability and poverty in a crisis context is a complex issue that requires a multifaceted approach.
To address the urgent energy crisis, in September 2022, the Government of Moldova, with UNDP support, designed and implemented the Energy Vulnerability Reduction Fund (EVRF) as an evidence-based compensation scheme to minimize the negative impact of energy inflation on Moldovan households.
The EVRF aims to compensate energy-poor and vulnerable households for the increase in centralized heating, natural gas and electricity tariffs, with the overall goal to reduce vulnerability and decrease the risks for vulnerable households to fall into the energy poverty and mitigate the vulnerability for future energy shocks.
This study highlights that energy price compensations provided through the EVRF during the 2022-2024 cold seasons have significantly alleviated the impact of rising energy prices on households' welfare.
As a result of the support, during the 2022-2023 and 2023-2024 cold seasons, the average energy poverty rate declined from 89.0% to 81.3%. Absolute poverty also fell from 44.3% to 34.9%, while food poverty dropped from 25.6% to 17.8%. Moreover, the impact on monetary poverty extended beyond the cold season.
The EVRF proved particularly beneficial for vulnerable groups. Women-led households and the older people, who typically spend a larger share of their income on energy, benefited significantly. Ukrainian refugees in Moldova also received EVRF compensations, reducing their monetary poverty rate by 18% and energy poverty by 7% - a smaller impact than for local households, largely due to refugees' extremely low initial income.
To capitalize on these positive outcomes, the study emphasizes the need for further targeted interventions, especially in rural regions where energy poverty remains high. It also recommends the integration of long-term energy efficiency measures. A comprehensive response could include emergency relief efforts, increased access to renewable energy, encouragement of energy conservation and efficiency and fostering of community-led solutions and energy compensation mechanisms.
