Fuel Poverty in Korea and Its Policy Implications

Abstract

Fuel poverty has been defined by the UK's Warm Homes and Energy Conservation Act (2000) as a condition where a household needs to spend at least 10 percent of its income on fuel to keep its home properly heated, to 21°C in the living room and 18°C in the other parts of it. The definition has been found to be overly broad and unable to preclude high-income households that spends more than 10 percent of their income on fuel. In his 2012 report Getting the measure of fuel poverty, John Hills proposed the "Low Income, High Cost" (LIHC) approach setting two thresholds: a fuel poverty threshold of 60 percent of median income after deducting fuel costs and a fuel costs threshold which is estimated based on the median modeled cost. A household's energy cost presupposes an adequate level of energy use, and as the discussion is still ongoing in Korea as to what constitutes an "adequate level" of energy consumption, this study assumes that a household is fuel-poor if it spends too much of its income on energy or is unable to keep the home adequately warm.