Factors Influencing Choice of

Energy Sources in Rural Pakistan

Saad Moeen, Asjad Tariq Sheikh,

Saqib Shahzad and Shehryar Rashid

31st Annual General meeting of the Pakistan Society for Development Economists,

Islamabad

19 December, 2015

Plan of Presentation

• Introduction

• Research Question & Objective

• Data

• Methodology

• Results

• Conclusions & Policy Recommendations

Introduction

• Availability of efficient energy sources is an indicator of

standard of living;

• Household’s access to modern energy sources is limited in most

developing countries;

• Sources of energy vary between rural and urban populations,

across income groups, and type of household;

• In Pakistan, households use both modern and traditional sources

of energy for different uses such as lighting, cooking, heating,

and transportation; (Mirza and Kemp, 2009; Jan et al., 2012)

• Households spend 8% of total expenditure on energy (fuel and

lighting) (HIES: 2013-14)

Page 3

Introduction continued

• Pakistan has made significant progress in providing electricity

to villages and the usage of electricity in rural area is limited to

lighting; (Mirza and Kemp, 2009; Jan et al., 2012).

• For cooking and heating, mostly traditional sources are used in

rural areas of Pakistan (Mirza and Kemp, 2009; Jan et al., 2012).

• Use of traditional sources is main cause of indoor air pollution

and many respiratory diseases; (Heltberg et al., 2000; Dewees, 1989; Liu et

al., 2008).

• Two broadly used models

– Energy Ladder Model (Hosier and Dowd, 1987; Leach, 1992; Sathaye and

Tyler, 1991; Smith et al., 1994; Reddy and Reddy, 1994)

– Fuel Stacking Model (Barnes and Qian, 1992; Hosier and Kipondya, 1993;

Davis, 1998; Masera et al. 2000; Heltberg 2005).

Page 4

Research Question & Objective

Research Question:

• Why some households use modern sources while

other use traditional?

• What are the factors that determined their choice

between different sources of energy?

Objective:

• To answer these question using the recently collected

data from rural Pakistan

Data

IFPRI / PSSP’s Rural Household Panel Survey (RHPS)

• 19 Districts (12 in Punjab, 5 in Sindh, and 2 in KPK)

• 1,876 Households (1,180 in Punjab, 487 in Sindh, and

209 in KPK)

• Household Energy Consumption Module

• Household Characteristics

• Community Level Data

• Demographic Characteristics

Types of Energy Sources for Analysis

• Electricity

• Gas (include direct gas connection and LPG)

• Firewood

• Animal/Plant Residue (dung cake and agriculture residue)

• Other sources (kerosene, petrol, diesel, coal etc.)

Energy Usage and Consumption in Rural Pakistan

IFPRI / PSSP’s RHPS Round 3.0 (2014)

0

10

20

30

40

50

60

70

80

90

100

Electricity Natural Gas Firewood Animal/Plant

Residue

Others

Per

cen

tag

e

Energy Usage Energy Consumption

Household Energy Consumption by

Purpose in Rural Pakistan

IFPRI / PSSP’s RHPS Round 3.0 (2014)

0

10

20

30

40

50

60

70

80

90

100

Electricity Natural Gas Firewood Animal/plant

Residue

Others

Per

cen

tag

e

Lighting Cooking Heating

Household Response during Outages/Shortages

IFPRI / PSSP’s RHPS Round 3.0 (2014)

Main Source

of Energy

Alternative source of Energy

No

alternative Electricity Gas Firewood

Animal/plant

residue Others

Gas 20.1 2.21 0 35.41 1.05 41.23

Firewood 16.66 0 7.18 0 70.73 5.42

Animal/Plant

residue 4.6 1.55 0 55.51 29.72 8.62

*Others 17.92 0 0 0 0 82.08

Note: For other sources of energy, the major alternate source is petrol and furnace oil.

Unit Cost of Energy Sources (PKR per MMBtu)

IFPRI / PSSP’s RHPS Round 3.0 (2014)

Gas Firewood Animal/plant residue

0

50

100

150

200

250

300

350

Ru

pee

s p

er M

MB

TU

Household Decision to Choose

Resource of Energy

IFPRI / PSSP’s RHPS Round 3.0 (2014)

Energy Source

Lighting (Electricity) Cooking & Heating

Gas Firewood Animal/plant

residue

Methodology

• Multinomial logit models is appropriate

(McFadden, 1974; Maddala, 2001; Greene,

2008)

• Gas is selected as the base as it is modern and

efficient energy source.

• The Results of model is explain by average

marginal effect and environmental effect of

traditional sources.

Factors determining the decision to adopt

particular source of energy

• Demographic Variables

– Number of dependents, Household head Age, Dummy household head

education, Dummy household gender, Dummy for farm household,

Income Quantile

• Fuel Type Characteristics

– Thermal Value, Number of Females Involved in collecting firewood,

Number of Children Involved in collecting firewood

• Site Characteristics

– Provincial Dummies

• Development Indicators

– Distance to Nearest Market, Dummy for Developed Internal Mouza

Road

Model

The household is assumed to have a utility function of the form:

𝑈𝑖𝑗 = 𝑈(𝑍𝑖𝑗) (1)

Predetermined distribution:

𝑈𝑖𝑗 =𝑉𝑖𝑗 + 𝑒𝑖𝑗 (2)

The deterministic part can be written as:

𝑉𝑖𝑗 = 𝑋𝑖𝛾𝑗 (3)

Where 𝛾𝑗 are parameters, and 𝑋𝑖are explanatory variables; the 𝑒𝑖𝑗is a random

disturbance reflecting intrinsically random choice behavior, measurement or

specification error, or other unobserved attributes of the alternatives.

Model continued

The multinomial logit model is given:

𝑃𝑖𝑗 =exp (𝑋𝑖

`𝛾𝑗)

exp (𝑋𝑖`𝛾𝑗)

3𝑗=0

(4)

Setting 0 = 0, the model can be written as:

𝑃𝑖𝑗 =exp (𝑋𝑖

`𝛾𝑗)

1 + exp (𝑋𝑖`𝛾𝑗)

3𝑗=1

𝑗 = 1,2,3 𝑎𝑛𝑑 𝑃𝑖0 =1

1 + exp (𝑋𝑖`𝛾𝑗)

3𝑗=1

(5)

Which can be estimated using the maximum likelihood estimation method.

Determinants of Energy Sources: Demographic Variables

Variables

Cooking Model Heating Model

Firewood Animal/plant

residue Firewood

Animal/plant

residue

Coefficient Coefficient Coefficient Coefficient

Number of Dependents

0.146** 0.197** 0.103* 0.147**

(0.072) (0.077) (0.061) (0.07)

Household Head Age

-0.025** -0.020** -0.004 0.001

(0.01) (0.01) (0.01) (0.01)

Dummy Household Head

Education

-1.165*** -1.292*** -1.107*** -1.198***

(0.307) (0.305) (0.295) (0.294)

Dummy Household Gender

1.238*** 1.258*** 1.456*** 1.185***

(0.37) (0.40) (0.25) (0.36)

Dummy for Farm Household

1.089*** 1.317*** 1.139*** 1.394***

(0.39) (0.40) (0.36) (0.39)

Determinants of Energy Sources: Fuel Type Characteristics

Variables

Cooking Model Heating Model

Firewood Animal/plant

residue Firewood Animal/plant residue

Coefficient Coefficient Coefficient Coefficient

Thermal Value 0.02 (0.28) 0.325** (0.17)

(0.06) (0.18) (0.14) (0.28)

Number of Females Involved in

collecting firewood

1.891*** 2.125*** 2.273*** 2.545***

(0.48) (0.48) (0.48) (0.47)

Number of Children Involved in

collecting firewood

0.58 0.62 0.96 1.06

(0.55) (0.52) (0.82) (0.79)

Dummy for Second Income

Quintile

-0.656*** -0.618** -0.705* (0.46)

(0.25) (0.27) (0.38) (0.37)

Dummy for Third Income

Quintile

(0.62) -0.759* -0.853* -0.797*

(0.41) (0.45) (0.44) (0.45)

Dummy for Forth Income

Quintile

-1.516*** -1.388*** -1.606*** -1.309***

(0.34) (0.38) (0.43) (0.44)

Dummy for Fifth Income Quintile -1.474*** -1.422*** -1.787*** -1.692***

(0.32) (0.36) (0.38) (0.40)

Determinants of Energy Sources: Site Characteristics and Development Indicators

Variables

Cooking Model Heating Model

Firewood Animal/plant

residue Firewood

Animal/plant

residue

Coefficient Coefficient Coefficient Coefficient

Distance to Nearest Market

0.035** 0.02 0.029** 0.01

(0.02) (0.02) (0.01) (0.01)

Dummy for Developed Internal

Mouza Road

-2.439*** -2.069*** -3.476*** -2.985***

(0.49) (0.50) (0.68) (0.67)

Dummy for Punjab Province

0.64 1.33 0.78 1.42

(1.11) (1.12) (1.06) (1.08)

Dummy for KPK Province

1.904* 1.48 2.654** 1.80

(1.12) (1.13) (1.12) (1.14)

Constant

2.942*** 1.878* 1.888*** 1.37

(0.88) (0.97) (0.73) (0.94)

Variables

Cooking Model Heating Model

Firewood Animal/plant residue Firewood Animal/plant residue

Coefficient Coefficient Coefficient Coefficient

Test Statistics

Observations 2045 2063

Pseudo R2 0.1658 0.226

Log pseudo likelihood -1461 -1388

Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

Variables Gas Firewood Animal/plant

residue

Number of Dependents -0.009** -0.003 0.012**

Thermal Value 0.005 0.052* -0.056***

Household Head Age 0.001** -0.003*** 0.001*

Dummy Household Head Education 0.064*** -0.028 -0.036**

Dummy Household Gender -0.060** -0.012 0.072*

Dummy for Farm Household -0.066** 0.017 0.048*

Number of Females Involved in collecting firewood -0.097*** 0.012 0.086***

Number of Children Involved in collecting firewood -0.032 0.038 -0.006

Distance to Nearest Market -0.001* 0.003** -0.002

Dummy for Developed Internal Mouza Road 0.116*** -0.131** 0.015

Dummy for Second Income Quintile 0.037*** -0.036 -0.001

Dummy for Third Income Quintile 0.033 0.007 -0.040

Dummy for Forth Income Quintile 0.078*** -0.078** 0.000

Dummy for Fifth Income Quintile 0.069*** -0.059 -0.009

Average Marginal Effects for Cooking

Variables Gas Firewood Animal/plant

residue

Number of Dependents -0.0071** -0.0039 0.0111*

Thermal Value -0.0055 0.0927* -0.0872*

Household Head Age 0.0002 -0.0017** 0.0015**

Dummy Household Head Education 0.0582*** -0.0267 -0.0315*

Dummy Household Gender -0.0546*** 0.0074 0.0472

Dummy for Farm Household -0.0684*** 0.0133 0.0551*

Number of Females Involved in collecting

firewood -0.0970*** -0.0041 0.1011***

Number of Children Involved in collecting

firewood -0.0540 0.0400 0.0140

Distance to Nearest Market -0.0007 0.0026* -0.0018

Dummy for Developed Internal Mouza Road 0.1518*** -0.1549*** 0.0031

Dummy for Second Income Quintile 0.0290 -0.0694** 0.0405*

Dummy for Third Income Quintile 0.0280 -0.0243 -0.0037

Dummy for Forth Income Quintile 0.0691** -0.0937** 0.0245

Dummy for Fifth Income Quintile 0.0759*** -0.0648* -0.0111

Average Marginal Effects for Heating

Variables Gas Firewood Animal/plant

residue

Number of Dependents -* - +*(-) Thermal Value +(-) +* -*(+*) Household Head Age +*(+) -* +*(-*) Dummy Household Head Education +* - -*(+) Dummy Household Gender -* -(+) +*(+) Dummy for Farm Household -* + +*(+) Number of Females Involved in collecting firewood -* +(-) +*(-) Number of Children Involved in collecting firewood - + - Distance to Nearest Market -*(-) + -(-*) Dummy for Developed Internal Mouza Road +* -* +(-*) Dummy for Second Income Quintile +*(+) -(-*) -(-*) Dummy for Third Income Quintile + +(-) - Dummy for Forth Income Quintile +* -* +(-*) Dummy for Fifth Income Quintile +* -(-*) -(-*)

Results

Results

• Firewood is preferred for both cooking and heating, while

plant residue is used for heating;

• Most gas users have better human capital;

• Male headed households tend to use plant residue for cooking

and heating;

• Farm households are less likely to use gas;

• Use of Firewood decreased with more developed mouza roads;

• The household tends to use modern source of energy if they

are educated;

• The household tends to use more gas and less firewood with

higher income.

Results: Health and Environment Effect

Pollutant Name of Pollutant

1 Kg

Firewood

per MMBtu

1 Kg

Animal & Plant

Residue per

MMBtu

Health & Environment Effect

NOX Nitric Oxide &

Nitrogen Dioxide 0.49 0.67

Water Quality Deterioration, Global Warming, Toxic

Chemicals, Visibility Impairment

CO Carbon Monoxide 1.33 27.56 Dull headache, Weakness, Dizziness, Vomiting,

Shortness of breath, Confusion, Blurred vision, Loss

of consciousness

SO2 Sulfur Dioxide 0.06 n/a

Inhalation and TOXIC, Skin and Eye Contact

(CORROSIVE), Ingestion

Effects of Long-Term (Chronic), Exposure,

Carcinogenicity

VOC Volatile Organic

Compound 0.04 1.78

Acetone, Benzene, Ethylene glycol, Formaldehyde,

Methylene chloride, Perchloroethylene, Toluene,

Xylene , 1,3-butadiene

PM Particulate Matter 1.27 2.89 Heart or lung disease, nonfatal heart attacks

irregular heartbeat, aggravated asthma, decreased

lung function, coughing or difficulty breathing

CO2 Carbon Dioxide 460 476 Cardiovascular Effects, Nerve Damage, Asphyxiation

Department for Environment Food & Rural Affairs (UK) and

Global Change Impact Studies Centre: GCISC

Conclusions & Policy Recommendations

• Results indicate that rural households use different sources of energy

simultaneously support fuel stacking model;

• Firewood is preferred source for cooking and heating;

• Traditional energy sources have harmful effects on environment and

human & animal health;

• These effects can be minimized by using controlled appliances;

• There is need to:

– Create awareness for these harmful effect

– Introduce controlled appliances

– Encourage households to use these appliances

• Provision of modern sources of energy would not only be more

efficient but also less harmful to environment and health;

• Policy required for modernization of traditional sources

• Promote efficient market to obtain firewood on competitive prices in

rural area.

THANK YOU

QUESTIONS?

SUGGESTIONS?