Liquidity Constraint, LPG Stoves and Charcoal Consumption: A Randomized Controlled Trial in Tanzania

The high start-up cost of modern cooking appliances has been shown to be the key factorthat hinders transition of households from biomass energy to clean energy in developing coun-tries. We designed a randomised controlled... [ view full abstract ]

The high start-up cost of modern cooking appliances has been shown to be the key factorthat hinders transition of households from biomass energy to clean energy in developing coun-tries. We designed a randomised controlled trial to identify the impact of relaxing households’liquidity constraints on LPG stove adoption and charcoal use in urban Tanzania. In collabo-ration with a local micro-finance institution, we randomly assigned households into a subsidytreatment and a credit treatment, which included different repayment arrangements. We showthat, relative to households in the control group, adoption of LPG stoves reduced charcoal useby 47.5% in the treated group. However, providing subsidies for stove purchases resulted ina much larger reduction in charcoal use (54%) than did providing access to credit (41%). Wehighlight the importance of relaxing households’ financial constraints and improving access tocredit to encourage urban households to switch to clean energy sources and save the remainingforest resources of Africa.