The impact of cooling energy needs on subjective well-being: Evidence from Japan

Highlights

• Our study is the first to examine the impacts of cooling energy needs.

• An increase in cooling energy needs lowers subjective well-being.

• Higher temperatures increase energy needs the most for lowest-income households.

Abstract

Given the increasing energy needs for indoor cooling and the growing attention to energy poverty, it is important to understand how cooling energy needs in the hot summer season affect human well-being in relation to income level. Using Japan as a case country, this study examines how much energy consumption increases in response to higher temperatures in the summer season and how the additional energy needs for indoor cooling, in turn, affect subjective well-being (SWB). The results confirm that higher cooling energy needs can reduce SWB. In relation to income level, the lowest-income group faces the highest cooling energy needs, presumably due to lower energy efficiency in housing. In contrast, the negative effect of cooling energy needs on SWB is the largest for the middle-income group. This contradictory finding implies that behavioral aspects matter for the evaluation of SWB.

Introduction

In the current context of climate change and economic growth, the need for indoor cooling is accelerating around the world (IEA, 2018). In Europe, the soaring frequency and intensity of heatwaves enhance people's willingness to purchase air conditioners (ACs) (IEA, 2018; Washington Post, 2019). In emerging economies, such as Africa and Asia, increasing income levels and populations also stimulate the need for ACs (IEA, 2018). On a global scale, the International Energy Association (IEA) (2018) has projected that the energy demand for indoor cooling will more than triple by 2050. Because a lack of access to indoor cooling is known to have detrimental impacts on health (Barreca, 2012; Yu et al., 2019), such expansion of ACs is an adequate step to achieve better well-being.

With this expected increase in the need for ACs, understanding the affordability of cooling energy and its well-being impact is important. In light of energy justice, it is especially crucial to reveal how much burden is placed on vulnerable households to afford indoor cooling energy in hot regions (McCauley et al., 2019). Energy affordability for vulnerable households has been researched with the term energy poverty (EP). EP is defined as the inability to access clean and affordable energy at a socially sufficient level (Bouzarovski and Petrova, 2015). Hotter summers can increase the risk of EP because higher outdoor temperatures increase the necessary energy for indoor cooling (Thomson et al., 2019). With the case countries of Europe and Australia, studies have shown that EP has a negative impact on well-being, which is proxied by subjective well-being (SWB) (Awaworyi Churchill et al., 2020; Biermann, 2016; Kahouli, 2020). However, these studies do not address summer-related energy poverty, which results in no evidence of the well-being impact of cooling affordability. In developing countries, the affordability problem is still not on the main agenda because their low level of income still makes accessibility and reliability issues more important (Igawa and Managi, 2022). Considering the important role of temperatures as one of the main driving factors of EP, it is important to know how additional energy needs for indoor cooling can affect well-being.

To fill this gap, this study aims to show how energy needs in summer affect well-being with the case country of Japan. Specifically, we ask the following two questions: (1) How does a rise in temperature affect energy usage in the summer season, and, in turn, how does it affect well-being? (2) Are there any heterogeneous effects on this relationship in relation to income level? Answering these questions can provide a better picture to consider how cooling affordability matters for human well-being and what types of policy interventions are expected to achieve energy justice.

To answer these questions, we use an original survey of Japanese households that includes electricity expenditure data and SWB measures. Japan's characteristics are suitable for our research question because it has the largest adaptation rate of ACs on the globe, namely, 91% (IEA, 2018), and large geographical heterogeneity in the use of cooling energy. The dataset is unique in that it has seasonal electricity expenditure data for summer (between July and September) and detailed geographical information at the postal code level. By merging satellite data of Cooling Degree Days (CDD) with these survey data, this study identifies climate conditions for each household in the summer season. Then, we use household-level CDD as the instrumental variable (IV) for observed energy to extract the variation in energy needs for indoor cooling.

As an additional contribution, this CDD-based IV strategy allows us to examine EP's well-being impact in a more fundamental way. In the literature, EPs have been concerned with high “required energy.” Required energy is a concept understood as necessary energy to attain basic energy services at a socially sufficient level (Bouzarovski and Petrova, 2015). Importantly, climate conditions are one of the driving factors for required energy because higher outdoor temperatures in the summer season increase the necessary energy to keep a home at a certain temperature. Required energy is different from actual, observed energy because households can consume less or more than required energy (Thomson et al., 2017a). As an important problem, researchers cannot know the actual amount of required energy because its calculation requires detailed data, such as housing and appliance energy efficiency. As a result, researchers cannot distinguish whether observed high energy is consumed as needed or implicates consumers' high preferences for energy services beyond the necessary level. By using the IV of CDD, which calculates energy needs for buildings based on outdoor temperatures, this study aims to differentiate the impact of cooling energy needs from that of preference-based energy consumption for usage other than cooling. This strategy allows us to examine EP in a more meaningful way because the energy variation induced by a higher CDD is close to the concept of required energy. Although this observed vs. required energy issue has been well debated in definitional aspects (Papada and Kaliampakos, 2018), only a few empirical studies have paid attention to it (Rodriguez-Alvarez et al., 2019; Welsch and Biermann, 2017).

The remainder of this paper is structured as follows. Section 2 explains a key aspect of the definition of EP and presents the theoretical assumptions about how cooling energy needs affect well-being. Section 3 describes the empirical strategy for identifying the impact of cooling energy needs on SWB and how our original dataset uniquely offers a good analysis environment. Section 4 presents the estimation results. Section 5 discusses the findings and policy implications. Section 6 concludes.