Household energy demand and environmental management in Kenya Nyang, F.O.

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1 UvA-DARE (Digital Academic Repository) Household energy demand and environmental management in Kenya Nyang, F.O. Link to publication Citation for published version (APA): Nyang, F. O. (1999). Household energy demand and environmental management in Kenya Amsterdam: Thela Thesis General rights It is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s) and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an open content license (like Creative Commons). Disclaimer/Complaints regulations If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. UvA-DARE is a service provided by the library of the University of Amsterdam ( Download date: 15 Dec 2018

2 In studying energy systems, analysts typically isolate relatively homogenous segments with common characteristics and purposes; and then construct descriptions for each segment based on its special characteristics, data, and applicable theory. Energy demand is typically separated into customer or user classes: residential, commercial, industrial, transportation, [and agricultural] (Hogan and Weyant, 1982). In Kenya, the residential or households segment is the single largest user of primary energy; accounting for 58 per cent of the national primary energy consumption in tons of oil equivalents (Kenya, MoE, 1992). Households consume a diversified portfolio of fuels including; charcoal and firewood (woodfuels), electricity, liquefied petroleum gas (lpg), and kerosene; but woodfuels provide most of the energy. Households account for a significant proportion of national energy consumption in Kenya. It is therefore important to understand the pattern of energy use in this sector, responsiveness to economic factors and the demographic characteristics associated with the users of various fuel mixes. One objective of this thesis is therefore to analyse the responsiveness of household energy demand to fuel prices, and consumer income; and how demographic, and environmental factors influence these responses. Responsiveness of demand is measured in terms of elasticities; and the estimation of elasticities is usually seen as the primary aim of empirical demand analysis (Deaton and Muellbauer, 1980b). The relevance of the responsiveness of demand i.e. elasticities, has to do with policy formulation and analysis and can be seen in the light of the ongoing liberalisation of the Kenyan economy. For instance electricity tariffs have since been raised and the prices of petroleum fuels have also risen. Some relevant questions that arise include: What fuel mixes are involved? What is the effect on various segments of the population? How is the demand for the specific fuels affected? What is the ultimate effect on the environmental resource base? The inclusion of demographic variables in the analysis helps in delineating the target population affected by particular energy policies. For example, the income elasticities for a given fuel may differ between rural and urban households. It is accepted in the literature, that woodfuel demand contributes to environmental degradation in developing countries. However, empirical measurements of this impact are rare. One reason for this is that woodfuels are often excluded from analyses due to lack of data. Yet, the explicit consideration of woodfuels is essential for assessing the impact of household energy demand on the environment, analysing the household's economic response

3 characteristics, and the structure of household energy demand. Since woodfuels are sourced from rural areas, dependence on woodfuels has implications on the rural environmental resource base and hence on the environmental quality. To establish a link between woodfuel production and consumption and the corresponding impact on the environment requires suitable indicators, and these are difficult to come by. The second objective of this thesis is therefore to analyse firewood scarcity and to develop scarcity profiles as well as an environmental indicator for measuring the scarcity of firewood. As a measure of firewood scarcity, the indicator is therefore a measure of environmental degradation with respect to firewood resources. In this respect this thesis contributes to the empirical measurement of environmental degradation with respect to firewood. The households segment consists of rural and urban households. An important distinguishing feature between the two is the fact that urban households rely almost entirely on purchased energy, while rural households purchase only a small part of their energy needs. For instance rural consumers may either purchase or collect woodfuels; they may barter labour or farm produce for kerosene, and others generate their own electricity using solar panels or internal combustion engines. As Kenya goes through the various development stages households becomes more affluent, and the economy more monetised. Thus in rural areas households gradually shift to using purchased rather than gathered firewood; while in urban centres households opt for higher quality fuels such as electricity. The question that arises is: what factors motivate their choices for these fuels? This is particularly relevant for electricity which is used by approximately half of urban households; and for purchased firewood which is used by approximately a quarter of rural households. This thesis employs qualitative response models to analyse the households decision to use purchased firewood; and to use electricity. Even as the country develops and the rural economy becomes more monetised, some segments of the rural population will still collect firewood for subsistence purposes. This begs the question: what is the shadow value of collected firewood as an environmental good? This thesis employs an agricultural household model to estimate the shadow price of collected firewood in rural Kenya. At the household level, there are environmental management practices that are fundamentally linked to the rural energy system. These practices include the use of agricultural residues for fuel, tree planting, and the use of purchased firewood. In the literature, the use of agricultural residues for fuel is said to be detrimental to environmental quality, yet households continue to use them. Is there empirical evidence to link the use of agricultural residues as fuel with environmental degradation? What factors motivate households to use agricultural residues for fuel? or to use purchased firewood? or to undertake conservation measures? What is the role of on-farm tree density in the provision of firewood for the household? The analysis in this thesis provides some answers to these questions. Energy saving woodfuels stoves are promoted because, it is claimed, they use less fuel in identical applications than traditional stoves, hence enabling households to save on fuel and

4 the associated costs. The fact that they use less woodfuels also makes them environment friendly, since they relieve some of the pressure on woodfuel resources. How big is the impact of improved woodfuel stoves on the households demand for energy; and for specific fuels? Is the energy demand for households using improved woodfuel stoves less than that of households not using the improved stoves? These are also questions that this thesis attempts to find some answers for. More specifically this thesis: (i) Analyses the structure of household energy consumption; with household energy aggregated by value and by Joules, (ii) Estimates energy demand and fuel demand systems for rural and urban households that rely totally on purchased energy. Both the energy demand and fuel demand systems incorporate, explicitly, the effects of demographic characteristics, (iii) Estimates a firewood production and consumption model for rural households that collect rather than buy, firewood, (iv) Analyses the impacts of household environmental management practices on firewood consumption and supply. The research questions that this study seeks to answer include the following: (i) What is the impact of demographic factors on household energy demand responses to fuel prices and money income? (ii) What is the structure of energy consumption in urban and rural households in Kenya? (iii) What is the impact of environmental factors on household energy demand? (iv) What is the shadow price of collected firewood? (v) What factors motivate the households choice for fuels and what are their respective influences? (vi) What factors motivate household choices in environmental management practices?

5 An outline of the thesis This thesis is divided into four parts. Part I: The Surveys; is made up of the first three chapters. It consists of a review of the literature on household energy demand and environmental management in developing countries; a review of some aspects of consumer theory applicable to the analyses in this study; and results from the field survey. In Chapter 1 the study commences with a critique of selected studies that have analysed household energy consumption and environmental management in developing countries. The aim of this chapter is to present the current status of this subject area and to point out the gaps that this study seeks to fill. In Chapter 2 the discussion shifts to the theoretical framework of analysis, but focuses on issues relevant to the empirical estimation of consumer demand. The specific issues discussed include duality, aggregation, separability and qualitative response models. These issues are employed in various parts of this thesis. A description of the field survey and its' main results are presented in Chapter 3. They include descriptions of the fuels consumed, their respective penetration rates and the mean consumption rates for urban and rural households respectively; as well as the environmental management activities of rural households. Part II: Household demand for energy and fuels; consists of three chapters dealing with the empirical measurement of the demand for household energy and for specific household fuels. The analysis in this part involves households that purchase all the fuels they use. In Chapter 4 the analysis involves the household energy structure, as well as the estimation of aggregate energy demand functions and Engel curves for household fuels. In Chapter 5 the analysis shifts to the responsiveness in household demand for fuels based on the five most frequently used fuel mixes in Kenya. The theoretical framework is the linear approximate form of the almost ideal demand system of Deaton and Muellbauer (1980a,b), extended to account for demographic variables by scaling. Lastly in Chapter 6, the analysis shifts to qualitative response modelling of the households choice of electricity; and the measurement of household demand for electricity. Part III: Household energy and environmental management: analyses the interaction between household energy consumption and environmental management. It deals specifically with the production and consumption of collected firewood; and with various aspects of the link between firewood consumption and environmental degradation, in Chapters 7, 8, and 9. Chapter 7 involves an analysis of the concept of firewood scarcity and the different indicators used. On the basis of these indicators, firewood scarcity profiles are developed for the districts sampled. It is demonstrated that the ranking of the districts with regard to firewood scarcity largely depends on the indicators used. An indicator that combines all the different indicators is proposed as a measure of environmental degradation with respect to firewood. The analysis of firewood demand by households that use collected firewood is taken up in Chapter 8. For such households the frameworks of Chapters 4 and 5 in Part II, are inappropriate because part of the incomes of such households is the collected firewood. The appropriate framework is

6 one that combines both production and consumption; such as the agricultural household model of Strauss (1986); which has its roots in the work of Chayanov (1926). The framework of the agricultural household model (AHM) is utilised to estimate the shadow price of collected firewood; and the relevant elasticities for the same. The households choices of energy related environmental activities are analysed in Chapter 9. These activities include the use of agricultural residues for fuel, conservation, tree planting and the use of purchased firewood. Part IV: Policy issues and conclusions; analyses energy policy in Kenya and the conclusions from the study. The discussion in Chapter 10 involves the policy framework in the Kenyan energy sector; and analyses the current policy and management practices in the light of the findings of this study. Chapter 11 is the concluding chapter. It summarises the main results and presents the conclusions of the study.