Source: Future Development
Across the world, almost 3 billion people rely on traditional biomass fuels such as fuelwood and charcoal as their primary energy source. The problem is that cooking and heating with these “dirty” fuels in their “dirty” devices emits pollutants that are hazardous to human health, the environment, and global climate. Although improved cook stoves (ICS) help everyone—they lower emissions, cut firewood use, and reduce forest degradation—the uptake of such stoves has been slow. We’ve been working to come up with a fix.
Professor of Public Policy and Environmental Economics - Duke University
Faculty Director of the Sustainable Energy Transitions Initiative -Duke University
WHY IS ICS UPTAKE SLOW AND LOW?
Research attempting to answer this question has mainly focused on the cook’s household, finding that factors such as income, education, and access to credit limit adoption and sustained use. But this demand-driven narrative ignores the other side of the equation: the producers and distributors. Increasing awareness by both practitioners and the policy community has led to growing calls for a new focus on stove supply barriers and innovative policy tools to increase ICS sales.
WHICH POLICIES AND PROGRAMS INCREASE ICS SALES MOST?
One such promising mechanism is carbon financing, which can use market forces to both bring new money to ICS suppliers and correct for the negative environmental externalities (a fancy term for carbon emissions) of burning dirty fuels in traditional stoves. Programs such as the Clean Development Mechanism, the Gold Standard, and the Verified Carbon Standard offer market emission reduction certificates, which then entice the private sector to invest in improved stoves.
Carbon financing may be an attractive funding mechanism but, like any new market, it imposes both large upfront and recurring costs for registration and validation. So the question is: Does carbon financing increase stove sales?
Luckily, the Partnership for Clean Indoor Air surveyed suppliers during the initial phase (2008-2011), collecting data on sales and the characteristics of the suppliers. When we conducted regression analyses of these data, we found that suppliers who have carbon financing sell about five times more stoves than suppliers who do not.
Figure 1: Sales of improved stove were concentrated in a few countries during 2008-2011
DO INCREASED SALES JUSTIFY THE ADDED COSTS?
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Using a standard cost-benefit framework, we added (1) the costs to suppliers of providing stoves with the help of carbon financing (e.g., validation fees, program costs) and (2) the costs to households of purchasing stoves from a carbon financed-backed program (e.g., the costs of increased use, maintenance, and monitoring of stoves) and subtract these costs from the benefits of (3) increased sales revenue, (4) household fuel savings, and (5) reduced carbon emissions. Voila! Benefits exceed costs, on average, from both the supplier and society’s perspective.
Figure 2: The benefits of carbon finance to boost sales of improved cook stoves exceed their costs
SO, WHEN IS CARBON FINANCING A GOOD IDEA?
The size of the net benefits is most sensitive to how many stoves the supplier is selling at baseline and the overall program size. Moreover, sales of improved liquid petroleum gas stoves also consistently return the highest net benefits, while improved kerosene stoves generally return the lowest. Additionally, as presaged by the growing research on household demand for cook stoves, the use rate of stoves is a major influence on the size of the net benefit. So, knowing whether local markets, institutions, and culture support stove use is key.
In summary, everyone who worries about the environmental and social implications of cooking stoves and fuels should take another serious look at carbon financing. Producers should also “do their homework” to see how they can quickly scale up supplies.
Questions? Write to lauren.masatsugu@duke.edu or subhrendu.pattanayak@duke.edu.