poverty incidence rates across countries, as they are compared against a fixed standard, although this comparison still suffers from limitations.

**To estimate this measure, one can divide the household's overall energy expenditure by the household income or household expenditure.**<sup>**27**</sup> The measure can be estimated as a share of household expenditure or income. Still, income measures are usually not captured accurately in household budget surveys, as the instruments are generally designed to capture consumption and expenditure patterns rather than income sources. Therefore, it is recommended that these measures work appropriately and are reliable when deciding how to scale energy expenditure in the case of the relative measures.

# Measure M/2 and 2M

## **Another relative expenditure-based measure, next to the 10-percent measure, is the so-called 2M**

**measure.** The "2M" indicator captures abnormally high energy expenditure. It represents the percentage of households whose energy expenditure share (in income or consumption) is more than twice the national median share (Energy Advisory Hub, 2022).  This metric gauges the burden of energy bills on households in relation to their incomes or overall expenditure, using the national median as a reference. Therefore, poor households that limit their energy consumption due to budgetary constraints may not be captured in this measure.

**In contrast, the M/2 measure follows the concept of hidden energy poverty and measures abnormally low absolute energy expenditure.** M/2 is an indicator that captures abnormally low energy expenditure, consisting of the share of households whose absolute energy expenditure is below half the national median. The M/2 measure draws from the "hidden" energy poverty concept, which argues that households might decrease their energy consumption so much that it becomes abnormally low and could result in negative health outcomes (Nguyen, 2022). Notice that households living in highly efficient buildings that technically require less energy may be considered energy poor under this definition.

**Both of these are relative measures, as the thresholds moved with the distribution, which makes it**

**challenging to compare them over time.** Relative thresholds are a cutoff point in relation to the overall distribution of income or consumption in a country (in this case, they are linked to the median of the distribution). Consequently, if the entire distribution moves up or down, the M2 and M/2 measures might still not improve. It might, therefore, be difficult to use these measures to track progress over time. Moreover, they might suffer from measurement errors, and it might be difficult to compare these measures across countries as it requires harmonizing income, expenditure, and the approach toward measuring energy expenditure.

# Low-Income-High-Cost Measure

**The expenditure-based indicator "Low Income-High Costs (LIHC)" identifies energy poor households as those pushed into energy poverty due to high fuel costs and low incomes** . This measure was officially adopted in England to measure energy poverty and replace the original 10 percent measure. Based on this indicator, a household is considered energy poor if two conditions are met: 1) if they have an energy expenditure above the national median, and 2) if the remaining income after they spend that amount (in equivalized terms) is below the official at-risk-of-poverty (AROP) threshold (Hills, 2012) (Figure 3).<sup>28</sup> This approach directly considers households affected by the problem,

> 27 In the case of the application at hand, the overall household expenditure is harmonized following World Bank ECAPOV Harmonization Guidelines.

> 28 This is equivalent to having an income threshold equal to the AROP plus the energy expenditure. This includes the income poor (those with incomes below AROP) and the vulnerable that fall into poverty because of their

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