Econonomics of Energy and Environmental Policy

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Economic efficiency and CO2 impact of a clean cooking program in Ecuador

Clean cooking programs are implemented to replace polluting fuel technologies and fight climate change. In 2014, Ecuador launched a clean cooking program to improve environmental conditions for its population and reduce the large financial burden spent on liquid petroleum gas subsidies. In this paper, we analyze the economic and environmental impacts of this program. We use official macro-data (2015–2021) instead of surveys, which is not common in the studies about these programs. We find that this program saved 978,470 kton of CO2 and reduced Ecuadorian liquid petroleum gas consumption by 3,845,808 barrels, improving the national balance of trade by 151 million USD. However, the rate of return of the subsidies spent in this program was below one, coming in at only 0.72463. We also determine that the subsidized electricity was indeed generated with hydropower. Based on our results, we provide several regulatory recommendations. Households need efficient economic incentives to switch from one energy source to another, and the replaced fuel cannot remain subsidized. Otherwise, the participation predictions made by the implementing institutions might be too optimistic and result in the unnecessary allocation of economic resources to reinforcing grids and commissioning new electricity-generation plants. Finally, the generation technology used to replace subsidized electricity must be renewable to avoid problematic trade-offs.
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Keywords: Clean cooking, decarbonization, CO2 emissions, LPG consumption, Ecuador

DOI: 10.5547/2160-5890.13.1.ddav

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Published in Volume 13, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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