Rural Household Biomass Fuel Production and Consumption in Ethiopia: A Case Study

Over 90 percent of energy consumption in Ethiopia comes from biomass fuels and this pattern is a major cause of land degradation and deforestation in the country. This paper examines biomassfuel collection and consumption behaviour of a sample of rural households in Ethiopia. We use a non-separable agricultural household model to take into account imperfections in, or absence of, markets for fuel and labour used in collection. The method of instrumental variables (2SLS) is used in the estimation of demand functions to take care of endogeneity of virtual (shadow) fuel prices and wages. Negative own-price elasticities indicate advantages of forest policies that can reduce fuel collection time and make more time available for other activities. The results also suggest that fuel choice and mix are influenced by scarcity which indicate a possibility of policy interventions directed at reducing the relative price of wood and encouraging increased dung use as fertilizer and hence reduced land degradation. While income elasticities of demand give indications of increasing viability of such interventions with growth, the absence of evidence of substitutability and the effects of household resource endowment indicate the importance of cooking habits and culture.