Energy poverty, understood as a situation in which one household is not able to afford essential domestic energy services, is a phenomenon spread throughout Europe. In the following study, the Republic of Serbia will be considered specifically. The latter is, as other Western Balkan countries, affected by inefficient dwellings and housing appliances. These are characterised by outdated technological devices that further hamper their energy efficiency and carbon footprint. Additionally, the majority of the buildings in Serbia are outdated and need to be refurbished. This is aggravated by the fact that the residential sector represents the largest final consumer of energy in the country. Countries presenting a higher range of low-quality and energy-inefficient dwellings tend to present higher levels of energy poverty (and vice versa). Typically, residents living in energy inefficient households present below-average disposable incomes. Similarly, low-income groups are more subject to energy poverty. This hints to the “vicious cycle of energy poverty”, where households presenting low disposable incomes eventually end up spending more on energy since these are unable to afford inefficient dwellings and/or house appliances. The correlation between household energy efficiency and energy poverty has been recognised throughout the literature and among governmental institutions. In fact, increasing energy efficiency is a target present both in the Fit for 55 package delineated by the European Commission and the Sustainable Development Goals developed by the United Nations.

Considering the previously mentioned “vicious cycle of energy poverty” and the fact that low-income groups are more affected by energy poverty, it was decided to focus on this specific strait of society. Additionally, being a contracting party of the Energy Community Treaty, the Republic of Serbia adheres to implementing EU climate directives (sustainable goals) in the country. Stemming from this, the following Main Research Question was delineated, around which the whole research process was structured: Which energy policy strategy should the Ministry of Mining and Energy implement in Serbia as to achieve household energy efficiency and energy poverty objectives set by the European Commission directed towards low-income groups?

A case study-mixed methods approach was utilised for the following study. By merging the two methodologies, the proposed policies presented elements and were analysed from both a qualitative and quantitative perspective. On the one hand, the institutional, legal, and policy framework in the field of energy in Serbia was analysed, as to ensure the proposed policies were politically and socially feasible. On the other hand, the technical effectiveness in terms of final energy consumption and expenses reduction was also considered. To that end, a MS Excel linear and static simulation model was employed. It was found that performing a simulation-backed analysis of the available policy strategies in Serbia, delineating an optimal one to reduce energy poverty levels and improve household energy efficiency among low-income groups in Serbia, satisfying the sustainable targets set by the European Commission, represented a knowledge gap in the literature.

Three main policies were delineated corresponding to three different simulated scenarios. Namely, (i) the implementation of an emissions trading scheme extended as to also include the residential sector; (ii) the phasing out of heating oil and fossil fuels in 2030, followed by natural gas in 2040; (iii) the implementation of Minimum Energy Performance Standards (MEPS) in the residential sector. The latter resulted as the best performing policy, presenting the highest reduction in final energy consumption and expenses, resulting politically and socially feasible, delivering a positive social impact among low-income households in Serbia.