Calabashes for kilowatt-hours: rural energy and market failure

Abstract

This paper describes how management and information failures can retard transitions from the traditional use of biomass fuel by low income rural consumers and micro-producers. In general, societies move away from traditional biomass use as economic development takes place. If one accepts the doctrine of revealed preference (built on the initial work of Samuelson, 1938), then these trends imply that such transitions provide net gains in utility. This paper shows how various “failures” entrench existing fuel use patterns—hindering the transition to new fuel use patterns. In order to qualitatively discuss how these transitions may take place, an indicative neo-classical description of consumer and producer behavior is used. Three types fuel-transition “driver” are identified. The effect of information and management failures on these drivers, and thus the energy transition, is discussed. Reference is made to a specific case study in which a partial transition from biomass occurred in response to an intervention to address an environmental management failure (the deforesting of a carbon sink.) It is concluded that interventions to encourage transitions to cleaner sustainable fuel use may need to recognize and address management and information failures in a systematic manner.