Subsidies for Clean Cookstoves Abate Carbon at $7 per Ton

The goal of carbon mitigation financing is simple: to reduce carbon dioxide-equivalent (CO₂e) emissions as much and as fast as possible. Doing so effectively requires starting with the cheapest, most effective carbon abatement opportunities–what economists call the “abatement supply curve”. Where do clean cookstove subsidies rank relative to subsidies for other abatement technologies?

More than 200 million people use charcoal as their primary cooking fuel. Charcoal use carries substantial climate costs: a typical household in our Nairobi study emits 4.2 tons of CO₂e per year using charcoal. For comparison, according to the EPA, an average American household’s gasoline car emits 4.6 tons of CO₂e per year. Reducing emissions in the global cooking sector is therefore a potentially large mitigation opportunity.

Two concerns have dampened cookstove financing by for example private investors, philanthropists, and carbon offset buyers. The first is additionality: what share of buyers would not have purchased the stove without the subsidy? The second is impact: how much CO₂e is actually abated when an average household buys the improved stove? This can be eroded by using multiple stoves, low usage, rebound, or poor durability. Many improved-cookstove programs have delivered smaller reductions than expected, and the absence of a standardized way to measure additionality and impact has made it difficult to identify projects that work.

Accounting for Imperfect Additionality and Impact

In a new research paper, we use a randomized trial to evaluate these questions in the context of the Jikokoa, a charcoal stove constructed by ECOA using improved insulation materials. We worked with 955 households living across four neighborhoods in Nairobi, Kenya. Each household was randomly offered a subsidy ranging between 10% to 75% of the stove’s $40 store price. We also used an incentive-compatible mechanism to elicit each household’s willingness to pay. Aggregate cost-effectiveness can be written as the product of two terms: the average abatement per stove sold (impact) and the number of additional stove sales per dollar of subsidy (additionality).

Raising the subsidy increased the purchase rate by 41 percentage points. Of the subsidy spending at the higher level, 16% went to non-additional buyers (households that would have bought the improved stove even at the lower subsidy). Accounting for this, each additional stove sale required $32 in subsidy spending. Because the trial randomizes subsidies, estimating impact does not require measuring stacking, rebound, or usage directly; it only compares the aggregate difference in average charcoal use between buyers (including those who use their stoves rarely or never) and non-buyers. We collected seven independent measures of charcoal usage: weighed ash, high-frequency expenditure surveys (a series of 20 SMSes over sixty days, immediately after purchase and again a year later), in-person surveys (twice), phone surveys, and Purple Air PM2.5 monitors.

Across all seven measures, improved-stove ownership reduced charcoal use by between 27 and 48%, or on average 379 kilograms per year. This corresponds to an average reduction of 1.7 tons of CO₂e per year across all owners. Three and a half years after purchase, 83% of buyers still owned a working stove, and 11% of original non-buyers had acquired one. Accounting for durability and for adoption among non-buyers, each additional stove sale abates 4.6 tons of CO₂e over its lifetime.

How Much Does Carbon Abatement Cost?

Combining these estimates, the subsidies abate CO₂e at $7 per ton. Under alternative assumptions about durability and emissions factors (including the fraction of non-renewable biomass, or fNRB), we estimate a range of $3.5 to $8.1 per ton. Even our highest estimate is well below the U.S. Environmental Protection Agency’s most conservative social cost of carbon of $120 per ton. It is also low relative to other forms of subsidized abatement: electric-vehicle subsidies cost $1,356 per ton of CO₂e abated and residential rooftop solar $237 per ton. By this measure, a dollar of cookstove subsidy abates on the order of 200 times more CO₂e than a dollar of electric-vehicle subsidy.

Subsidies also generate private fuel savings. The average buyer saves $284 in charcoal costs over the life of the stove. Combining the fuel savings, the avoided climate damages, and the subsidy transfer, and netting out the cost of manufacturing the stove, we estimate that each $1 of cookstove subsidy generates between $26 and $58 in social benefit.

A General Method for Evaluating Subsidies

These estimates apply to one fuel, one city, and one country, and we do not claim that all cookstove subsidies are equally cost-effective. The broader contribution is methodological: our approach of randomizing subsidies, following a sample over time, and comparing aggregate emissions can be used to evaluate other abatement subsidies wherever potential buyers can be identified. Because it measures what households do rather than relying on what sellers report, it can be applied independently of the organizations that issue or sell credits.

The potential scale is large. About 54 million households worldwide use charcoal as their primary cooking fuel. If they resemble the households in our study, widespread adoption of improved stoves would abate more than 90 million tons of CO₂e per year. Rigorous, independent evaluation can help direct climate financing toward the most effective abatement opportunities.

Susanna Berkouwer

Assistant Professor of Business Economics & Public Policy

Susanna Berkouwer is an assistant professor of Business Economics & Public Policy at the Wharton School.

Joshua Dean

Assistant Professor, University of Chicago

Joshua Dean is an assistant professor of behavioral science and economics at the University of Chicago Booth School of Business.