Solutions for energy poverty are being examined in Chișinău at the European level

June 29, 2023

The Republic of Moldova’s handling of the recent energy crisis, ensuring on-bill compensation for households and private entities, is a remarkable success story. That’s why it was selected for discussion at the international conference “Tackling energy poverty in Europe: challenges, lessons learned and ways forward, Moldova’s Case”, which took place on 29-30 June in Chișinău.

The event was organized by the Ministry of Labor and Social Protection, under the auspices of the Government of the Republic of Moldova, with support from UNDP. It brought together high-level representatives from EU countries, the Government of the Republic of Moldova, international organizations, national and international experts, and the private sector with expertise in these domains.

“Thanks to Moldova's friends and our joint efforts, through the Energy Vulnerability Reduction Fund, we covered half of the gas and electricity bill for our citizens. We want to increase energy efficiency, improve the on-bill compensation mechanism, to make it as fair as possible to ensure that families that need the most support receive the highest compensation,” said Dorin Recean, the Prime Minister of the Republic of Moldova at the opening of the event.

The main objective of the conference is to share good practices from the EU about fighting energy vulnerability and energy poverty, as well as to present the experience of the Republic of Moldova in designing and implementing a targeted programme to compensate for energy poverty in a time of crisis.

In order to deal with the impact of the energy crisis, the Government of the Republic of Moldova established in July 2022 an Energy Vulnerability Reduction Fund with the support of development partners providing technical assistance and financial resources. The fund provided targeted compensation in the bill for vulnerable households based on 5 categories: very high, high, medium, low or non-vulnerable consumers. The criteria used to assess household energy poverty included income, the ratio of income to energy expenditure, the type of heating system and the composition of the household.

“In the last two years, the increase in the prices of energy resources has affected the standard of living of the population, which is already facing a series of difficulties. But, we were not defeated. Instead, we have worked continuously to offset the impact of the crisis while continuing with structural reforms. I am grateful to all the countries and international organizations that have supported us in these efforts. Thanks to them, but also to the energy vulnerability reduction fund of the Government, we were able to face the impact of the energy crisis. The main purpose of this conference is to share the experience of our country, but also the good practices of the European Union regarding the fight against energy vulnerability and energy poverty,” said Alexei Buzu, the Minister of Labour and Social Protection of the Republic of Moldova.

A total of 5.87 billion MDL was allocated for the Energy Vulnerability Reduction Fund for 2022 and 2023. Of this, 3.46 billion MDL was provided by development partners. The largest contribution to this Fund was made by the European Union, with 1.4 billion MDL, followed by Germany, the Multi-Donor Trust Fund of the World Bank (contribution from the U.S. Government and the Government of Norway), Lithuania, Sweden (through UNDP), Switzerland (through UNDP) and the Czech Republic. UNDP Moldova contributed to the creation of the Fund and the mobilization of resources through the “Addressing the impacts of the energy crisis in the Republic of Moldova” programme, financed by the European Union. The platform was created with the support of UNDP, the EU and the Government of Slovakia.

“The recent impact evaluation on the Energy Vulnerability Reduction Fund, conducted by UNDP and the Government, reveals significant positive impact of the compensations on reducing energy poverty, income poverty, as well as promising results in terms of the impact of the compensations on energy consumption,” said Ivana Živković, UNDP Assistant Administrator and Director for the Regional Bureau for Europe and Commonwealth of Independent States.

According to a UNDP study, over 60% of households in Moldova are affected by energy poverty. The energy compensations granted last year reduced the level of energy poverty by 43% and had the greatest impact on the most vulnerable families; 83% of the costs for natural gas bills were compensated.

The energy crisis was an opportunity to strengthen Moldova’s energy resilience. Across Europe, governments have identified the main drivers of energy poverty for consumers, such as high energy prices, low household incomes and energy-inefficient equipment. EU Member States have developed a set of tools and proposed several solutions, from tariff ceilings and temporary tax breaks for vulnerable consumers to value coupons or subsidies.