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Credit, LPG Stove Adoption and Charcoal Consumtion:Evidence from a Randomised Controlled Trial

Yonas Alem1 Remidius Ruhinduka2 Peter Berck3 & Randall Bluffstone4

1University of Gothenburg

2University of Dar es Salaam

3University of California Berkeley

4Portland State University

Sustainable Energy Transitions in Developing and Emerging Economies(SETI) Workshop

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 1 / 20

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Introduction

Charcoal is the main source of cooking fuel in Urban Africa

In Tanzania, the consumption increased from 47% to 71% onlybetween 2001 and 2007, there has been more recent increase

Dar es Salaam households alone consume more than 500,000 tones ofcharcoal per year, half of the total consumption in the whole country(World Bank, 2009)

This fuel consumption growth is contrary to energy ladderhypothesis:The country experienced Positive economic growth withinthe same period

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 2 / 20

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Intro...The Energy Ladder

 

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 3 / 20

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Intro....Is that a BIG DEAL?

Serious Environmental Implications

It requires ONE hectare of Miombo woodland to produce only 3tonnes of charcoal (Luoga et al, 2000)This implies more than 167,000 hectares of forest per annum to meetcharcoal demand for DSM aloneNot to mention the associated pollution,health and Climate changeconsequences ((Kandlikar, et al. 2009; WHO,2009)

Women and children spend relatively longer time for cooking usingcharcoal than alternative cleaner fuels such as LPG (Lewis andPattanayak, 2012)

Charcoal users spend more money to cook similar dish compared tothe LPG users, else equal

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 4 / 20

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Intro....research problem

Majority are aware of existence of alternative cleaner and affordablefuels (eg. LPG stoves) yet the switching has been significantly slow

Transition to cleaner fuels is conditional on adoption of appropriatecooking appliances, often very costly

Liquidity constraints and lack of credit suggested as potential factors(among others) to adoption of modern cook stoves (Mobarak etal,2012; Lewis and Pattanayak,2012; Edward and Langpap,2004)

Relevant research question therefore is:

Does relaxing urban households’ liquidity (financial) constraintsinduce them to adopt Liquified Petroleum Gas (LPG) stoves andreduce their charcoal consumption?

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 5 / 20

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What we do

We implement a Randomized Controlled Trial Experiment to studythe adoption and impact of modern/cleaner stoves (LPG stoves) inan urban setting when such constraint is relaxed

We randomly selected 722 eligible households from 16 carefullytargeted streets of two districts in Dar es Salaam region

Some randomly selected households in Dar es Salaam received LPGstove package (valued at TZS 200,000-equivalent to 100 USD) eitheron credit or on subsidy

Credit payable in full within 6 months but subsidy required paying 25%of full cost upon receipt of the stove

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 6 / 20

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What we do..

We implemented our intervention in collaboration with one ofTanzania’s large micro-finance institutions: Women AdvancementTrust, WAT-SACCO

Helped us to distribute the LPG stoves to “credit” households andfollowing up on the loan repayments

The intervention was implemented in late May, 2015 following abaseline and pre-intervention survey

Out of 425 households assigned to treatment, only 296 actually tookup (i.e. 70% compliance rate)

Follow-up survey was conducted in late September, 2015 (fourmonths after the intervention)

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 7 / 20

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Some Images....Training sessions

Training Sessions

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 8 / 20

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Some Images....stoves distribution

Distribution exercise

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 9 / 20

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Some Images....Stove package

Stove package

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 10 / 20

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Our Contributions

Several previous studies attempted to identify the factors thatpromote adoption of Improved Cook Stoves (ICS), and the impact ofICS on fuel consumption, indoor air pollution, and health in arandomised set-up

Smith-Sivertsen, 2009: GuatemalaHanna et al. 2015 Orissa, IndiaMiller and Mobarak, 2013: BangladeshBensch et al., 2015: Burkina FasoBeyene et al. 2014: Ethiopia

Common feature: All focus on improved-traditional-stove (i.e.samefuel but with more efficiency) and in rural areas

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 11 / 20

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Our Contributions Cont...

Few studies investigate adoption of modern (and cleaner) cookingappliances and their impact (i.e. advocating total fuel switch)

Edward and Langpap (2004): high start-up cost is the major factor thathiders transition to clean energy cooking appliances in urban GuatemalaAlem et al. (2014): economic status and education are importantfactors in urban Ethiopia

Both these studies use observational dataDifficult to infer a causal relationship between income and adoption ofmodern cooking appliances because of endogeneity

We identify the impact of relaxing financial constraints on adoption ofmodern and high-quality LPG stoves, and their impact on charcoalconsumption using a randomised controlled set-up

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 12 / 20

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Key Results:Impact of LPG Stoves on CharcoalConsumption (ATT)

Table5: Impact of LPG stoves on Charcoal consumption

(1) (2) (3) Amount of charcoal

per week (log) Amount of charcoal

per week (log) Amount of charcoal per

week (log) Treatment -0.475***

(0.0881) Credit Treatment -0.414*** -0.384***

(0.0938) (0.0783) Subsidy Treatment -0.541*** -0.527***

(0.134) (0.126) Other controls NO NO YES Constant 2.899*** 2.899*** 2.784*** (0.0369) (0.0369) (0.248)

Observations 593 593 593 R-squared 0.091 0.094 0.122 Notes: *** p<0.01, ** p<0.05, * p<0.1; Standard errors clustered at the street level Other controls include: age, household size, years of schooling, male dummy, housing characteristics, experience in using charcoal, males decision power_dummy, total number of meals.

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 13 / 20

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Results:Impact of LPG Stoves on Charcoal Consumption(ITT)

[1] [2] [3]

[Char. kg (log)] [Char. kg (log)] [Char kg (log)]Treatment -0.324***

(0.0744)Credit Treatment -0.304*** -0.287***

(0.0939) (0.0774)Subsidy Treatment -0.344*** -0.330***

(0.0995) (0.0966)Intercept 2.894*** 2.894*** 2.845***

(0.0375) (0.0375) (0.0231)Controls No No YesObservations 698 698 698R-squared 0.042 0.043 0.065

Notes: ∗ ∗ ∗p < 0.01, ∗ ∗ p < 0.05, ∗p < 0.1.Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 14 / 20

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Results:Stove usage

25% of the treated households did not use the stoves over the lastone week from the day of the follow-up

Consistent to the impact estimates, households on credit treatmentwere more likely not to have used the stove (although the differencenot statistically significant)

Education level positively correlates with the number of times stovehas been in use

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 15 / 20

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Results:stove usage-correlatesTable6: LPG stove use: OLS regression results LPG use LPG use Credit treatment -1.126 -1.159

(1.205) (1.105) age 0.0268

(0.0486) Household size 0.315

(0.306) Years of schooling 0.445*

(0.219) male -0.837

(0.686) kitchen_separate -1.135

(0.991) house_private -1.526

(1.072) experience_charcoal -0.0414

(0.0375) maindecision_head 1.295

(1.195) totalmeals -0.0388

(0.176) Constant 12.03*** 8.446*

(0.669) (3.952) Observations 296 296 R-squared 0.005 0.059 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 16 / 20

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Results:Stove Satisfaction

0,80 0,790,77

0,73

0,80

0,680,700,720,740,760,780,800,82

Share of treated households satisfied by different features of the LPG stove

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 17 / 20

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Results: Stove satisfaction-correlatesTable 7: Satisfaction with LPG stove: Probit estimation results

Quality Functioning Food taste Cost Convenience Credit treatment -0.273 -0.309 -0.142 -0.237 -0.250

(0.248) (0.228) (0.212) (0.212) (0.217) age -0.00510 -0.000919 0.000793 0.00441 -0.00177

(0.00755) (0.00751) (0.00967) (0.00683) (0.00808) Household size 0.0795* 0.0448 0.0839* 0.0416 0.0878***

(0.0408) (0.0379) (0.0476) (0.0368) (0.0290) Years of schooling 0.0756** 0.0800** 0.0998*** 0.0718* 0.0789**

(0.0327) (0.0318) (0.0327) (0.0416) (0.0322) male -0.366* -0.374 -0.267 -0.407* -0.435*

(0.205) (0.256) (0.262) (0.245) (0.247) kitchen_separate -0.0582 -0.0119 -0.00106 0.107 0.0527

(0.222) (0.234) (0.187) (0.229) (0.221) house_private -0.266 -0.243 -0.196 -0.286 -0.223

(0.183) (0.220) (0.186) (0.189) (0.190) experience_charcoal 0.00779 -0.000186 -0.00815 -0.000188 -0.00395

(0.00818) (0.00807) (0.00803) (0.00808) (0.00809) maindecision_head 0.0683 0.0123 0.119 -0.0531 0.0111

(0.286) (0.281) (0.228) (0.261) (0.265) totalmeals -0.00608 -0.00579 0.000139 -0.00231 0.0111

(0.0267) (0.0300) (0.0248) (0.0339) (0.0315) Constant 0.542 0.689 -0.138 0.351 0.264

(0.671) (0.716) (0.638) (0.833) (0.823) Observations 296 296 296 296 296 Standard errors clustered at the street level *** p<0.01, ** p<0.05, * p<0.1

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 18 / 20

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Conclusions

One factor that hinders households’ transition to clean energy sourcesis the high start-up cost of modern cooking appliances

We use a carefully designed RCT experiment to study the impact ofLPG stove (purchased on credit or subsidy) on charcoal consumption

We provide evidence that relaxing liquidity constraint can significantlysave our forests, while providing both financial and cookingconvenience

subsidy treatment gives larger impact than that of credit treatment:reducing import duty and other taxes on LPG cylinders andstoves will have significant impact

Households largely use the stoves and are significantly satisfied withthe items

NOTE: These are just short term effects, things may change if wefollow these households in,say, one year time.

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 19 / 20

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THE END!!

We acknowledge the financial support from:

The International Growth Centre (IGC) at London School of Economicsis highly acknowledged

Environment for Development Initiative (EfD) at GothenburgUniversity, Sweden

Thank you for your attention!

Yonas Alem Remidius Ruhinduka Peter Berck & Randall Bluffstone ( University of Gothenburg, University of Dar es Salaam, University of California Berkeley, Portland State University )Credit, LPG Stove Adoption and Charcoal Consumtion: Evidence from a Randomised Controlled Trial25-27th April,2016 20 / 20