The Role of Energy Aid in Mitigating Energy Vulnerability: Evidence from Middle-Income Countries

Energy vulnerability has become an important concern for sustainable development, particularly in countries facing financial and structural constraints in strengthening their energy systems. This study examines whether energy aid reduces energy vulnerability in 42 middle-income countries over the period 2002–2019. The analysis combines Generalised Method of Moments (GMM), lagged Driscoll–Kraay estimations, two-stage least squares (2SLS) as an additional robustness check for potential endogeneity, and Method of Moments Quantile Regression (MMQR) to assess distributional heterogeneity. The GMM estimates show that energy aid is negatively and significantly associated with energy vulnerability in the full sample and both income sub-samples, while the lagged Driscoll–Kraay and 2SLS results support this relationship. The estimated effects are modest. The MMQR results indicate that the mitigating association becomes more pronounced at higher vulnerability levels in the full sample and upper-middle-income countries, whereas the quantile effects are weaker and less consistent in lower-middle-income countries. Overall, the findings suggest that energy aid can contribute incrementally to strengthening energy-system resilience, although its effectiveness varies across country groups and vulnerability levels.