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close this book Development in practice - Rural energy and development
close this folder Chapter six - Cooking fuels: toward more sustainable supply and use
View the document Improving end-use efficiency with biomass stoves
View the document Improving charcoal efficiency
View the document Developing more sustainable ways to supply biomass
View the document Agro-forestry and farm forestry
View the document Participatory to forest management
View the document Improving access to kerosene and gas
View the document Subsidies versus price liberalization
View the document Distortionary effects of high taxes on cooking fuels

Subsidies versus price liberalization

 

Several countries have subsidized kerosene anti LPG in an effort to increase their use. A cross-country study (Barnes and others 1994b) found that house hold fuel subsidies do influence rate of substitution For example. in Indonesia the government subsidizes kerosene to make it available nationshide The result is that most people use kerosene for cooking In China, coal is heavily subsidized, which helps explain why coal accounts for a significant proportion of total household energy use in most parts of China In Senegal, the government subsidizes LPG as a cooking fuel. which has led to the substitution of charcoal by high-income and middle-income urban residents.

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BOX 6.3 RURAL MARKET APPROACH ANCHORED IN GRASSROOTS REALITY: THE NIGER HOUSEHOLD ENERGY PROJECT

Before the Niger Household Energy Project was implemented in 1989, indiscriminate mining of fuelwood had severely depleted the natural forest and had degraded soils. The situation was most serious around urban areas, because neither the land on which the wood was grown nor the wood itself belonged to those who cut it. Moreover, the economic value of the wood could not be easily recovered from the woodcutters.

Through an integrated program of taxation and land tenure reform, responsibility for managing forest areas is being transferred to rural communities, and local people now have the right to manage wood resources on their own land. The project's national and local-level information campaigns are helping educate rural people about their rights to harvest forest resources and about setting up rural markets. These are established at the request of villagers, who decide on the local management structure and negotiate annual fuelwood harvesting and sales quotas based on the sustainable production capacity of the village's natural forest.

A typical village plan (see figure) calls for sustainable harvesting and replanting on a twelve-year cycle (impending harvest plots are P1, P2, and P3). Villagers sell the fuelwood they harvest to commercial transporters at prices the villagers determine. The taxes villagers collect from local transporters ensure that the full economic value of fuelwood is reflected in its price.

Source: Floor (1995).

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Typical Village Plan for Sustainable Planting

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BOX 6 4 HOUSEHOLD FUEL-WOOD USE VIRTUALLY ELIMINATED IN HYDERABAD

In 1980, only the upper 10 percent of households in Hyderabad used LPG, most of the middle class used kerosene, and the poor mainly used fuelwood

In 1994, however, the India Urban Energy Project found that a transition from fuelwood to LPG had transpired in Hyderabad. Fuelwood had virtually disappeared from the city center, except for small industrial and ceremonial uses. and, overall, 20 percent less fuelwood was coming into the city - a major drop, given that Hydera-bad's population had doubled since 1980.

A major cause of this dramatic transition was a change in government policy that increased access to LPG, liberalized fuel markets, and eased access barriers. As a result, the middle class can now get LPG, which in turn has allowed the poor to shift from fuelwood to kerosene.

Today, kerosene, and LPG are the dominant fuels in Hyderabad's households. The decisions households make concerning which fuels to use are strongly correlated with income levels. Households in the city slums earn about Rs 1,500 per month, and their monthly housing expenses are Rs 400 to Rs 600. These households generally spend about Rs 50 to Rs 60 per month on kerosene for cooking, and about the same on electricity for lighting, television, and perhaps a fan. When asked why they no longer use fuelwood for cooking, the householders replied that it is both expensive and inconvenient (see table below).

Source: Alam (forthcoming).

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Urban Consumer Prices of Cooking Fuels. 1994 (rupees)

Energy type

Price per unit

Price per megajoule

Cooking efficiency

Price per useful energy

LPG (kg)

7.57

0.168

0.60

0.280

Kerosene

       

Pressure (1)

3.50

0.100

0.35

0.286

Wick (1)

3.50

0.100

0.25

0.400

Wood (kg)

1.10

0.069

0.15

0.458

Electricity

1.12

0 311

0.75

0.415

However; as already noted. subsidies are often counterproductive: they limit use to the amount that governments can afford to subsidize, their fiscal costs can become prohibitive at high levels of consumption, and they lead to energy inefficiency In Senegal. for instance, LPG subsidies rose from US$2 million to USE 10 million per year between 1990 and 1994 As some observers pointed out at the time this increase could have paid for the salaries of several thousand teachers at a time the country was seeking to expand its education system. Studies in Hyderabad, India, before prices were liberalized. Indonesia, and Senegal also found that such subsidies mostly benefit higher-income people already using the fuels They do help the poor, but the higher-income groups get a "free ride " Lastly, the subsidized fuels are often diverted for other purposes Smoky. diesel-fueled cars and fishing boats are prevalent in Indonesia and Senegal. while kerosene and LPC are exported to neighboring countries. as happened with LPG in Ecuador (Barnes and others 1994).

In contrast, price and market liberalization can be effective in accelerating the transition toward more efficient modern fuels. A recent study of fuel use in Hyderabad (Alam forthcoming) shows how intiuential such policies can be Fifteen years ago, only 10 percent of the city's households used LPG because the Indian government had restricted production and imports Since then. the government has liberalized policies, and today more than 60 percent of households use LPG for cooking (box 6 4)

Cape Verde's experience is also relevant In 1984. 50 percent of the population used biomass for cooking; 42 percent used kerosene; and 8 percent used LPG, which was in limited supply. Five years later, following market liberalization. 42 percent of households were using LPG and 8 percent were using kerosene, showing how quickly people will change fuels once they can Note, however, that 50 percent still depended on biofuels, which demonstrates the importance of not focusing policies on the modern energy sector alone.

Subsidizing cooking fuels is not, therefore, a good policy from any standpoint encouraging equity. protecting the environment. or even promoting greater use of these fuels Liberalizing prices is a much mot-e promising alternative.