Credit, LPG Stove Adoption and Charcoal Consumption: Evidence from a Randomised Controlled Trial
Abstract
The high start-up cost of modern cooking appliances has been shown to be the key factor that hinders transition of households from biomass energy to clean energy in developing countries. We designed a randomised controlled trial to identify the impact of relaxing households鈥� liquidity constraints on LPG stove adoption and charcoal use in urban Tanzania. In collaboration with a local micro-finance institution, we randomly assigned households into a subsidy treatment and a credit treatment, which included different repayment arrangements. We show that relative to households in the control group, adoption of LPG stoves reduced charcoal use by 47.5% in the treated group. However, providing subsidies for stove purchases resulted in a much larger reduction in charcoal use (54%) than did providing access to credit (41%). We highlight the importance of relaxing households鈥� financial constraints and improving access to credit to encourage urban households to switch to clean energy sources and save the remaining forest resources of Africa.
Citation
Alem, Y.; Ruhinduka, R.; Berck, P.; Bluffstone, R. Credit, LPG Stove Adoption and Charcoal Consumption: Evidence from a Randomised Controlled Trial. International Growth Centre (IGC), London, UK (2015) 23 pp.
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