Indoor air pollution is a major problem in the developing world and. Most of these emissions are generated while cooking with solid fuels. For this reason, understanding the determinants of LPG (Liquefied Petroleum Gas) stove adoption in rural India is key for designing good policies. This column looks at the impact of electrification on the choice of cooking fuel. According to the energy ladder theory, the increase in socioeconomic status generated by electrification should push households towards the adoption of cleaner cooking fuels. Instead, we find that poor electrified households use biomass as primary cooking fuel at a higher rate than LPG compared to poor un-electrified households. We argue that this is a result of the expansion of households’ choice sets to include a variety of entertainment and comfort options (such as TVs and electric fans) resulting from electrification, which creates an additional strain on the budget of the poorest households.
Indoor air pollution and the need to switch to LPG
The fuel choice of households for everyday activities, such as cooking and heating, impacts a variety of factors influencing general wellbeing, from health to time use and exposure to financial risks. According to the 76th round of surveys of the National Statistical Office (NSO), in 2018, over 50% of rural households still used solid fuels as primary cooking fuel.
Domestic burning of solid fuels is the largest contributor to emissions of black carbon in South Asia and, black carbon is the second most important greenhouse agent after carbon dioxide 1). About 400,000-550,000 premature deaths occur annually in India from indoor air pollution exposure of children under five and adult women (Smith, 2000). The indoor daily average PM10 level ranges from between 1000 and 2000 mg/m3, 10-20 times above the national ambient air quality standard of PM10 set by the government of India. Exposure to outdoor and indoor PM2.5 is among the largest single causes of premature mortality in India.
In light of these facts, it is crucial for policymakers to understand the determinants of fuel choices and fuel stacking. In order to understand households’ fuel choices, we need to analyze how the different components of a household’s energy budget interact. In this column, we focus on the role played by the electrification status of a household in spurring the adoption of modern cooking fuels.
Electrification and its impact in rural India
Barron and Torero (2017) were among the first to analyze the impact of electrification on indoor air pollution, by measuring the nighttime PM2.5 content within dwellings. They find that in electrified dwellings PM2.5 concentration is on average 66% lower, leading to significantly lower rates of acute respiratory infections among children. The research presented here does not focus directly on indoor air pollution, but on one of its main causes, the burning of biomass in the cooking process.
In rural (and urban) India, electricity is rarely used directly for cooking. The benefits of electricity consist primarily of improved lighting and providing power for consumer appliances and agriculture. Electricity is a fundamental input for the utilization of a large variety of goods and, having access to a power connection opens up a lot of new consumption possibilities. As a consequence, the size of the choice set of a recently electrified household increases significantly. Households facing this change are faced with a new trade-off. They can i) invest in productivity-enhancing appliances (such as irrigation pumps or small mills) or appliances that help to optimize labor supply (for instance a fridge, which allows less frequent visits to the market), or ii) invest in entertainment or comfort-enhancing technologies (such as a television set or an electric fan). The way in which a household decides to use the recently acquired electricity is going to determine the impact that electricity has on its budget and, therefore, also on other consumption choices, like the ones related to energy.
If households decide to invest in productivity-enhancing activities their income would increase (Rao, 2013; Chakravorty et al., 2016; Bridge et al., 2016). According to the energy ladder theory, this increase in income should push households to increase their use of LPG, a normal good, and decrease their use of fuelwood, dung and crop residues, inferior goods. If instead households pick the second option and invest in non-productivity enhancing appliances, their income would not change, while their expenditures would increase.
We study the extensive and the intensive margin of adoption of LPG, i.e. the decision to adopt a fuel as primary cooking fuel and the share of expenditure dedicated to it, respectively. Our results indicate that especially poor households may invest in entertainment and comfort-enhancing technologies (Gupta and Pelli, 2020). We find that poor electrified households, reduce their adoption of LPG as a primary cooking fuel while increasing the adoption of fuelwood. We use shocks to hydropower supply to identify the causal impact of electrification on the cooking fuel choice and find that the 10 percentage point increase of the electrification rate in rural India between 2004 and 2009 led to a decrease in the adoption of LPG as the primary cooking fuel by 5.53 percentage points and an increase in the adoption of fuelwood by 6.02 percentage points.
Implications for policy
The government of India has been pushing for rural LPG adoption for years. The Ujjwala scheme, introduced in 2016, is its flagship program. This scheme provides a subsidy to government-owned oil manufacturing companies for each LPG gas connection that they install in poor rural households. Yet, this program only focuses on the sunk costs related to the uptake of LPG, our results seem to imply that the running costs, e.g. the costs of refilling the LPG cylinder, may still be a hurdle for poor households. Our findings align with Lee et al. (2020). The impact of electrification is heterogeneous and, therefore, it is important to evaluate its impact on the population that it is going to be affected. Moreover, the introduction of electricity should always be accompanied by complementary policies. In this specific case, they could consist of subsidies for the adoption of cleaner cooking fuels, in order to avoid a worsening of indoor pollution for the poorest households.
References
Barron M., and Torero M. (2017). Household Electrification and Indoor Air Pollution. Journal of Environmental Economics and Management, 86:81-92.
Bridge, B., Adhikari, D., and Fontenla, M. (2016). Electricity, Income, and Quality of Life. The Social Science Journal, 53(1):33–39.
Chakravorty, U., Emerick, K., and Ravago, M.-L. (2016). Lighting up the Last Mile: The Benefits and Costs of Extending Electricity to the Rural Poor. Resources for the Future Discussion Paper, 16-22.
Gupta, R., and Pelli, M. (2020). Electrification and Cooking Fuel Choice in Rural India. CIREQ Working Papers, 01-2020.
Lee, K., Miguel, E., and Wolfram, C. (2020). Does Household Electrification Supercharge Economic Development? Journal of Economic Perspectives, 34(1):122–144.
Rao, N. (2013). Does (Better) Electricity Supply Increase Enterprise Income in India? Energy Policy, 57:532–541.
Smith, K. R. (2000). National Burden of Disease in India from Indoor Air Pollution. Proceedings of the National Academy of Sciences, 97(24):13286–13293.
1) Black carbon is a component of particulate matter and causes human morbidity and premature mortality. It derives from the incomplete combustion of fossil fuels, biomass, and biofuels.