Economic Journal of Development Issues Vol. 25 & 26 No.

1-2 (2018) Combined Issue

Household Fuel Transition and Determinants of Firewood

Demand in Nepal
Bishnu Prasad Sharma, PhD
Associate Professor of Economics, Patan Multiple Campus, Tribhuvan University,
Nepal.
Email: bishnu@pmcecodtu.edu.np

Abstract
There is an emerging challenge of providing cleaner fuel to household to avoid various health
risks arising from the use of traditional non-cleaner fuel and to cope with the challenges created
by climate change. The energy transition theories explain how societies switch from traditional
to more advanced fuels that are cleaner and efficient. The paper examines the state of fuel
transition and determinants of firewood dependence in Nepal. This paper uses data collected
in 2013 from three different ecological zones through household surveys. The findings revealed
that biomass fuel particularly firewood is the dominant form of fuel used for household cooking
with 84 percent dependence followed by LPG 9 percent, biogas 6 percent and electricity around
1 percent. The findings revealed that energy security through energy stacking is a dominant
phenomenon. Presence of alternative fuel that are cleaner and convenient and ecological factors
are major determinants of household firewood demand followed by literacy status, landholding
size, household size, presence of large ruminant. Firewood consumption had negative relation
with its price but the relation was not economically significant. In contrast to the study
hypotheses, household income and remittance were not determining factors. In view of wider
coverage of electricity, there is prospect for shifting to renewable fuel sources through appropriate
pricing and technological improvement policies.

Key words: household energy, firewood, LPG, biogas, determinants.

1. INTRODUCTION
There is an emerging challenge of providing cleaner fuel to household to avoid
various health risks arising from the use of traditional non-cleaner fuel and to cope
with the challenges created by climate change (WHO, 2018).Household fuel choices
are determined by a wide range of socio-economic factors (Lusambo, 2016; Giri &
Goswami, 2018; Makonese et al., 2018; Rathore & Chauhan, 2018). There is a growing
interest on cleaner and convenient fuels against traditional fuels such as biomass
that is primarily dominated by firewood. The governments of Nepal had targeted
for achieving 80 percent electrification through renewable energy source and reduce
dependence on fossil fuels by 50 percent by 2050 (ADB, 2017). There is debate on
whether rural electrification alone will lead to adoption of cleaner energy for major

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household energy use (WHO, 2018). The objective of this paper is to analyze the status
of energy transition in rural communities in Nepal. It also analyzes the determinants
of the adoption of firewood consumption by household for different ecological zones
in Nepal.

Nepal’s present primary energy supply mix indicates that around 81 percent of the fuel
energy need is fulfilled by biomass energy while oil product constitutes 12 percent.
The rest is coal 4 percent, and hydro-electricity 3 percent (ADB, 2017). The households
are still the largest consumer of total energy consumption. For instance, residential
consumption comprises of 84 percent followed by 7 percent in transport, 6 percent
by industry, and 2 percent by commercial and public sector while one percent is used
in agriculture. Due to high dependence of biomass consumption, Nepal’s energy
intensity was 0.41 tons of oil equivalents and about four times higher than the world
average and it is the highest, largely because of inefficiencies in energy consumption
(ADB, 2017).

The energy transition theories examines how societies switch from primitive to more
advanced fuels that are cleaner and efficient (Berkhout et al., 2012). There are two
theories of energy transition: the energy ladder hypothesis and energy stack model.
The fuels energy ladder hypothesis examines the household fuel choice behavior of
a utility maximizing neo-classical consumer. According to this hypothesis, as socio-
economic status improves, households switch from inferior (such as firewood)
to superior fuels (bio-gas, electricity) based on physical characteristics including
cleanliness, cooking speed, ease of use and cost efficiency. There are, however, debates
on whether household incomes are the sole determinants of movement along the
energy ladder (Gupta & Kohlin, 2006; Campbell et al., 2003).

In contrast to the energy ladder model, the energy stacking model assumes household
energy transition takes places through multiple fuel usage instead of a discrete step-
like manner.

2. LITERATURE REVIEW
A large body of literature exists on the household energy consumption and its
consequences on the environment in the form of forest degradation, indoor air
pollution, outdoor air pollution etc. (Heltberg, 2005). There also exists various literature
on the energy demand and the energy supply aspects. Similarly a range of studies are
related to macroeconomic situations and energy consumption with its linkage to the
environmental Kuznets curve (EKC). A wide range of studies have tried to establish
relationship between household fuel choice and socio-economic determinants (Malla
& Timilsina, 2014; Rathore & Chauhan, 2018). Rathore and Chauhan (2018) for instance
examined how budget share on firewood is determined by per capita expenditure,
household size and price of alternative fuel.

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Traditional and unclean fuel use and its consequences on human health, human
resource development and ultimately on poverty spiral have been quite common
(Heltberg, 2005). Public policy interventions have taken place in the form of subsidies
on the purchase of cleaner fuels, innovations on cleaner technologies and outright
public provision of cleaner fuel equipment such as clean cook-stoves. However, most
of the interventions aimed at promoting clean cooking stoves focus only on technical
aspects, such as their efficiency and the achievable emissions reductions, whereas the
social, cultural and economic suitability of new stoves determine their continued use
(Malla &Timilsina, 2014). New lights have been shed on the existing factors for instance
not only the family size but the number of families is a more reliable predictor of the
total biomass consumption through the economies of scale (Knight & Rosa, 2012). This
is particularly true in the context of newly modernizing societies in the developing
countries. In such societies, the traditional joint family systems break down with
more preferences for nuclear families. This study aims to fulfill this knowledge gap
in a highly transitory economy like Nepal which has remained economically stagnant
internally but has been subject to rapid social changes induced by external factors
such as remittance income and technological penetration brought about by expansion
of transportation and communication networks. The paper also identifies prospects of
energy transition given the development of the various energy potentials in Nepal.

3. METHODS
Sources of Data
This study uses data collected by the author for a different purpose from forest
communities in three districts Dolkha, Gorkha and Chitwan representing the mountain,
hills and the terai respectively. The data collected represented 21 community forest
groups. Fifteen household were sampled randomly in proportion to three major ethnic
groups: the Bramhin/Chhetri, the indigenous communities and the Dalits from each of the
21 communities. Altogether 315 households were selected among which 309 households
were available for survey. Data were collected in 2013 between the months of August-
November with one year period before the date of survey as reference period.

Questionnaire interviews were administered to collect a wide range of information.

This information comprised of household rooster, landholding, distance to forests,
access to infrastructure, forest product extractions, fuel types and their intensity of use,
household consumption expenditure among others. The household energy in cooking
purpose was obtained for different types of sources that comprised of firewood, LPG,
biogas, kerosene and electricity and their respective shares.

Data were analyzed to examine the fuel use transition for household cooking.
Economic, social and access factors were analyzed to examine the determinant of
firewood consumption. The relationship between firewood and other fuel has also
been analyzed.
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Empirical Model
The determinants of firewood demand was analyzed using a log level regression
equation using the ordinary least square method. The empirical model is given as
equation (1). The dependent variable is the natural log of the total loads of firewood
collected by the household annually from all available sources. Two household with
no firewood use were removed from the analysis leaving a total of 307 households in
the analysis. The explanation of the explanatory variables is provided in Table 1.

LnFIREWOOD =b0 +b1 LARGE_RUMINANT + b2PER_CAPITA_CONSUMP +

b3REMIT_HH +b4HOUSEHOLD_SIZE + b5LITERATE_HH_HEAD +b6DIST_MARKET
+ b7DIST_CF + b8HAVE_BIOGAS +b9HAVE_LPG +b10PRICE++ b11MOUNTAIN
DUMMY+ b12TOT_LANDHOLDING + µI …………………(1)

Where b0 is the constant terms and b1,...,bnare the coefficients and µis are the stochastic
error terms for the equations. This study hypothesize that the relation between the
major variables discussed in the literature with appropriate contextualization in the
local context will be as follows for the three major energy sources for household
(HH) cooking. Some relations are not clear and we leave it for their empirical testing.
Households are clustered for the 21 communities to ensure robustness in the regression
results.

Table 1: Explanatory Variables and Their Expected Signs in the Empirical Model
Explanatory variables Explanation of variable Hypothesis
LARGE_RUMINANT Number of large ruminant units +ve
PER_CAPITA_CONSUMPT Per capita consumption of household -ve
Remittance household dummy, remittance
REMIT_HH -ve
recipient =1, else 0
HOUSEHOLD_SIZE Size of the household +ve
LITERA_HH_HEAD Literacy dummy literate =1, else 0 -ve
DIST_MARKET Distance to nearest market for LPG cylinder +ve
DIST_CF Time taken to fetch firewood from CF -ve
HAVE_BIOGAS Biogas dummy, HH has biogas installed=1, else=0 -ve
HAVE_LPG HH uses LPG stove -ve
PRICE Price of firewood -ve
Mountain dummy, household located in mountain
MOUNTAIN_DUMMY +ve
district=1, else =0
TOT_LANDHOLDING Total landholding in hectares -ve

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This study hypothesizes that large ruminant units has a positive relationship with
firewood. Higher per capita consumption is hypothesized to shift households to
cleaner fuel thus reducing the demand for firewood (Rathore & Chauhan, 2018; Malla
& Timilsina, 2014; Lusambo, 2016). Remittance has a psychological effect of inducing
households to assume that they are better off and motivate them to shift to cleaner
fuel. Household size is assumed to increase firewood demand as large household
need larger vessel for cooking that is possible only with firewood stoves (Rathore
& Chauhan, 2018). Literacy of household head is hypothesized to reduce firewood
demand due to higher awareness against indoor air pollution from firewood stoves
(Assa et al., 2015; Lusambo, 2016).

The distance to the market is assumed to act positively to firewood demand. Higher
the distance, lower the chances to shift to cleaner fuel due to transportation difficulty.
Distance to community forests (CF) is also assumed to have a positive relation with
firewood demand. Availability of cleaner and convenient fuels such as biogas plant
and LPG stoves are hypothesized to have a negative effect with firewood due to
substitutability. Price of firewood is assumed to be guided by economic theory of
demand and is considered to have a negative relation with quantity of firewood
consumed.

Mountain dummy is considered as an ecological dummy for households located

in mountain district where weather is cold throughout the year and causes higher
firewood demand for household heating and cooking. The analysis examines the
mountain region versus the hills or the terai region. Total landholding is considered a
resource variable that induces firewood consumption that is produced through natural
regeneration at almost no cost. Household with large landholding have naturally
higher firewood production due to the agro-forestry system practiced in Nepal where
trees grow in abundance on waste lands and terraces.

4. FINDINGS
General Household Characteristics
The socio-economic analysis of data indicated that indigenous communities constituted
the largest share of the population (55.7) followed by 32.7 percent and the Dalit
population 11.7 percent. The average household size was 4.9 persons and the mean age
of household head was 52 years. The percentage of literate households was 50. These
comprised of both kinds of education, formal schooling as well as functional literacy in
with general ability to read, write and undertake simple calculations. Ninety percent
of the total households had permanent toilets. Twenty percent of the total households
had at least one member in foreign employment. The average distance to a reliable
market centre was around 100 minutes away from home. The average distance to the
CF was about half an hour from residence.

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Regarding fuel type, annual firewood consumption was 63 backloads. Around ten
percent households had bio-gas installed for household cooking. The households had
a mean per capita consumption of Rs 62.4 thousand with a standard deviation of Rs.
79 thousand. The total landholding was 0.7 hectares per household.

Fuel Type and Dependence

Analysis of the fuel types and their respective dependence were analyzed to examine
the trend of energy transition and energy stacking. The findings of dependence on
various types of energy sources revealed that firewood was the most depended energy
source for household cooking with around 84 percent dependence. This was followed
by LPG, biogas and electricity. Kerosene was almost non-existent.

Table 2: Fuel Type and Dependence by Ecological Regions (Percent of Households)

Fuel Type Mountain Hills Terai Total
Firewood 96.80 71.09 82.52 83.73
LPG 1.78 18.32 8.47 9.37
Biogas 0.93 9.50 8.37 6.17
Electricity 0.47 1.09 0.64 0.73
Kerosene 0.02 0.00 0.00 0.01
Total 100.00 100.00 100.00 100.00
Source: Field survey, 2013

The full dependence on single fuel was analyzed to examine the energy transition.
The findings revealed that though there was overall 84 percent share of firewood in
household cooking overall, household depending on firewood alone was only 35
percent and they supplemented firewood by other sources. People depending only on
LPG were less than one percent while those depending wholly on other sources such
as biogas, kerosene or electricity were nil. This indicates that energy transition is still
not a feature of Nepalese household sector.

Table 3: Fuel Type and Percentage of Households Adopting (percent of

households)
Fuel for HH cooking Mean Std. dev. Min Max
Only Firewood 34.63 47.66 0.00 100.0
Only LPG 0.65 8.03 0.00 100.0
Only Biogas 0.00 0.00 0.00 0.00
Only kerosene 0.00 0.00 0.00 0.00
Only electricity 0.00 0.00 0.00 0.00
Source: Field survey, 2013

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On the flip side this study examined how households complemented firewood with
other sources of household energy. Firstly, this study examined what single additional
source sources they used to supplement firewood. The percentage of households using
a combination of firewood and LPG were 17 percent while household using firewood
with bio-gas were 6 percent. Surprisingly, electricity was the largest supplementing
energy source to firewood and this was practiced by almost one third of the total
households. Despite such a high percent using electricity to complement firewood
energy, electricity as a share of total energy consumption constitutes less than half
percent. This indicates that electricity is used only for non-energy consuming cooking
activities such as boiling tea, boiling water for drinking among others.

Table 4: Fuel Combination with Firewood (Percentage of Households)

HH using Combination with firewood Mean Std. dev. Min Max
LPG 16.50 37.18 0.00 100.00
Biogas 6.15 24.06 0.00 100.00
Electricity 33.33 47.22 0.00 100.00
Kerosene 0.00 0.00 0.00 100.00
Source: Field survey, 2013

Secondly, we examined how households supplemented household energy with a third

energy source beside firewood and its main complement. We found that households
using a combination of firewood, LPG and biogas were 1.6 percent while those using
LPG and electricity with firewood were 4.5 percent. Households using biogas with
electricity was around 3 percent.

Table 5: Joint Fuel Combination with Firewood (Percent of Households)

HH using combination with firewood Mean Std. dev. Min Max
LPG and biogas 1.62 12.64 0.00 1.00
LPG and electricity 4.53 20.83 0.00 1.00
Biogas and electricity 2.91 16.84 0.00 1.00
Source: Field survey, 2013

These findings indicate that household cooking fuel stacking is the major practice.
Firewood remains the major cooking fuel source supplemented by other fuel. Other
fuel were used as supplement to address seasonal variation in firewood collection, is
case of urgency such meeting children’s school time, when it is too hot in the daytime
to cook in firewood etc. We might find some other stacking such as LPG and electricity
in urban areas but that would be negligible.

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Determinants of Firewood Demand by Household

This study assumes that the household fuel energy depends upon various socio-
economic and resource access variables. The socioeconomic variables are the age of the
household head, literacy status, household size, size of landholding, livestock units,
remittance income, time taken to reach market center for LPG, time taken to collect
firewood from community forest, use of LPG and biogas, household landholding.

Price is the economic factor determining the consumption of firewood. Price of

firewood was not explicit in many communities because market for firewood did
not exist. In that case households were asked what minimum amount they would
be willing to receive if they have to bring a back load of firewood from some open
access for some neighbor on a regular basis. Some households were also asked what
maximum amount they would be willing to pay if there is a shortage of LPG they are
currently using and they have to resort to firewood. Some communities had references
of teashops which purchased firewood on a regular basis.

Table 6: Summary Statistics of the Explanatory Variables

Variable Mean Std. Dev. Min Max
LARGE_RUMINANT 2.39 2.20 0.00 17.00
PER_CAPITA_CONSUMPT 61732.36 78725.10 10264.67 709649.10
REMIT_HH 0.25 0.43 0.00 1.00
HOUSEHOLD_SIZE 4.87 2.11 1.00 15.00
LITERA_HH_HEAD 0.47 0.50 0.00 1.00
DIST_MARKET 98.00 71.41 1.00 320.00
DIST_CF 33.13 43.61 2.00 420.00
HAVE_BIOGAS 0.10 0.30 0.00 1.00
HAVE_LPG 0.24 0.43 0.00 1.00
PRICE 403.33 328.87 106.43 1963.33
MOUNTAIN_DUMMY 0.35 0.48 0.00 1.00
TOT_LANDHOLDING 0.68 0.65 0.00 5.09
Source: Field survey, 2013

The results from log-level regression equation using ordinary least square indicated
that fuel wood share in household cooking with various other socio-economic and
access variables indicated that the size of large ruminant units, the household size,
literacy status of household, presence of biogas or LPG stoves, price of firewood,
ecological belt and total landholding are several factors determining the demand for
firewood.

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The findings indicated a positive relationship between livestock units and firewood
demand. An addition of one large ruminant unit increases firewood demand by around
4 percent. The household size also had a positive relationship with firewood demand.
Back loads of firewood consumption increased by 4 percent for each additional
family member A household head being literate reduced the probability of firewood
consumption by 8 percent. This was because literate household heads were more
health conscious of the negative impact of smoke pollution. Having a biogas in general
reduced firewood use by around five 48 percent for the household while the existence
of LPG stove to complement household energy reduced the use of firewood by 26
percent. The impact of price on firewood consumption was negative indicating an
inverse relationship between the opportunity cost of firewood collection and firewood
consumption. However, the magnitude of the effect was not economically significant.
This indicates that firewood is still a necessary good in Nepalese rural community.

The ecological belt dummy indicates that a household in mountain belt increases
firewood consumption by 11 percent compared to their mid hill and Terai counterparts.
The total landholding per hectare also increases the use of firewood by 7 percent due
to the firewood by products created by the agroforestry system.

Table 7: Determinants of Loads of Fuel-Wood in Household Consumption

(Loads of Firewood Consumed In Natural Log Form as Dependent Variable)
Explanatory Variables Coefficient Rob Std. Err. t-statistics P>t
LARGE_RUMINANT 0.0358*** 0.0129 2.7700 0.0120
PER_CAPITA_CONSUMPT 0.0000 0.0000 0.0000 0.9980
REMIT_HH -0.0739 0.0522 -1.4200 0.1720
HOUSEHOLD_SIZE 0.0375*** 0.0067 5.6000 0.0000
LITERA_HH_HEAD -0.0779** 0.0344 -2.2700 0.0350
DIST_MARKET 0.0000 0.0003 -0.1200 0.9020
DIST_CF 0.0006 0.0004 1.4300 0.1670
HAVE_BIOGAS -0.4828*** 0.1202 -4.0200 0.0010
HAVE_LPG -0.2629*** 0.0522 -5.0300 0.0000
PRICE -0.0002*** 0.0000 -3.6800 0.0010
MOUNTAIN_DUMMY 0.1095** 0.0522 2.1000 0.0490
TOT_LANDHOLDING 0.0660* 0.0318 2.0800 0.0510
CONSTANT 3.9309*** 0.0741 53.0200 0.0000
Source: Author’s estimation.
Note: *, **, and *** indicate significance level at 10 percent, 5 percent and 1 percent
respectively.

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The F statistics was statistically significant at 1 percent level while the adjusted R
squared was 0.42. This R-squared value can be considered large enough in case of
cross sectional data. The estimates were robust due to clustering of households by CF
groups.

5. DISCUSSION
The finding of the analysis sheds important lights in the energy consumption behavior
in Nepal. The total household energy comprises of energy used for household cooking,
energy used in preparing animal feed and energy used for household heating during
cold. The findings indicated that households’ energy practice is basically energy stacking
with large dependence on firewood due to the nature of the agro-forestry based farm
system. A different result might be obtained for rural and urban communities.

The results also indicate an important policy perspective. Electricity occupies second
most preferred alternative to firewood. It could be mainly due to the prices, supply
irregularity and other physical requirement that have deterred households from
adopting electricity for household cooking. If electricity prices can be made affordable,
supply regular and provided with efficient stoves, electricity could substitute for LPG
and other forms of household cooking fuel.

Regarding the demand for firewood, the size of large ruminant units, presence of
alternative sources that are cleaner and efficient such as biogas and LPG had major
effect in household firewood consumption. Biogas installation reduced firewood
consumption of household by almost half. The supplement of LPG also reduced
firewood consumption by about a quarter of firewood use. Location of household by
ecological belt was found an important determinant of firewood use. Household in the
mountain region had 11 percent more firewood demand compared to their hill and
Terai counterparts. Literacy status of household head was another important factor
reducing household firewood demand indicating that literate household would reduce
their firewood demand by around 8 percent compared to non-literate household head.
The awareness of air pollution induced health impacts could be the possible reason for
aversion of firewood use. This finding concurs with a wide range of earlier studies
such as (Giri & Goswami, 2018; van der Kroon et al., 2013). The size of land holding was
also found to be positively related with firewood share in cooking due to the practice
of agro forestry. Households with large lands have trees in their own lands that make
use of firewood economical as well as compelling as thinning and pruning to remove
tree from covering agriculture land produces enough firewood as a by product.

Another determinant was household size. Household with large household size need
to cook in large vessels and is convenient with firewood cooking. Livestock keeping

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had a positive effect on household firewood demand. This is because in most rural
communities, livestock keeping requires collection of firewood for cooking gruel for
livestock and collecting firewood from various sources becomes compelling. Up-
scaling the collecting activity makes it economically rational for households to use
firewood for household cooking too.

In contrast to the expectation, there was no impact of per capita consumption, a proxy of
household’s standard of living with firewood consumption. This finding contradicted
with some earlier studies by Rathore and Chauhan (2018).Remittance was hypothesized
to have a negative impact on firewood consumption as household were expected to
shift to cleaner and convenient fuel such as LPG and biogas with remittance income.
However, there was no impact of remittance on household firewood consumption too.
The findings matched with Heltberg (2005), that distance to community source did not
affect use of firewood switching.

The energy ladder theory explains that as families gain socioeconomic status they
abandon technologies that are inefficient, less costly and more polluting and move
from traditional to middle category fuels such as charcoal, coals or kerosene. In the
last phase households switch fuels such as LPG and electricity (van der Kroon et al,
2013). Masera et al. (2000) had long ago produced evidence that higher ranked fuels
are usually more efficient and costly, but require less input of labour and produce less
pollution per unit of fuel. In this context, the analysis of the fuel use by households
indicates that Nepal has stepped into the energy transition ladder but is still at its very
bottom. Lower level fuels in the energy ladder indicate that fuel collection requires
more time and is more polluting. It produces more adverse impact on the environment
due to deforestation and land degradation. Unclean fuel leads to poor health among
child, women and elderly that inversely related to labour productivity and economic
contribution to household income (Rao & Reddy, 2007).

6. CONCLUSIONS
There is a growing concern on improving livelihood of the average and poor families
and protecting communities from the adverse effects of climate change. The energy
sector is one of the sectors that have multidimensional effects on improving the
livelihood and climate change effect mitigation. Shifting from non-renewable energy
to renewable and cleaner energy leads to household welfare improvement, improved
health and environmental conservation simultaneously. LPG is the second relied
source following firewood in total share of household cooking energy. However, the
evidence produced by this analysis indicated that electricity is a second important
resource at household’s access (33 percent households) after firewood. Only 17 percent
households use LPG besides firewood. Several studies have emphasized on energy

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stacking rather than energy transition as a more practicable solution to address energy
problem (van der Kroon et al, 2011). The evidence produced by this study supports
this approach

Government provision to promote electricity for household cooking is highly relevant

in the context of Nepal when the country is going to have a surplus of electricity in
the near future. Nepal Electricity Authority (NEA, 2018) reports that 70 percent of the
total population has access to grid electricity supply. The authority which is currently
managing 1500 megawatt (MW) electricity has expected to add 1200 MW within the
next 2-3 years and has already signed power purchase agreements with independent
power producers (IPPs) for 4500 MW. In this context there is a need for developing
appropriate pricing and technological improvement policy to promote electricity
consumption at household level.

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