Towards Use of Cleaner Fuels in Urban and Rural Households in Colombia: Empirical Evidence from 2010 to 2016.

• Author: Perez, Jhon

1. INTRODUCTION

   Governmental and non-governmental organizations worldwide, such as United Nations (UN), International Energy Agency (IEA) and Economic Commission for Latin American and the Caribbean (ECLAC), have declared universal energy access goals (OECD, 2015; United Nations, 2018). These goals came into effect in January 2016, and they will continue to guide United Nations Development Programme (UNDP) policy and funding until 2030. For instance, in 2015, approximately 2.7 billion people, amounting to 40% of the world population used traditional solid fuels for cooking: approximately half of this population belonged to developing countries in Asia (OECD, 2015).

   The energy access definition includes electricity access and access to modern fuels for cooking and heating (Daly and Walton, 2017). The challenge consists in reduce and substitute the use of solid fuels by clean fuels such as LPG, NG and electricity. The literature is broad and extensive in relation to energy access and it considers two major approaches. First approach refers to energy poverty, involving energy prices and indices that consider the multidimensionality of poverty (Pachauri et al., 2004; Nussbaumer et al., 2012; Birol, 2007). The second approach is based on the households fuel selection taking into consideration socioeconomic patterns and determinants (Heltberg, 2004; Khandker et al., 2014; Hosier and Dowd, 1987). These approaches recognize important aspects such as energy policy, theory of human capital, fuel substitution and others.

   Amartya Sen (1981) defines the measure of poverty as a complex problem with a multidimensional approach which includes monetary poverty, heating privation and residential energy efficiency. Birol (2007) explains that, although residential energy consumption presents a constant growth, there are factors that influence energy poverty. Some of those are the reductions on real income on developing countries and the energy prices fuctuations due to changes in fossil fuels prices (Charlier et al., 2018). Moreover, the role of income and lack of infrastructure for cleaner fuels are factors that limit access to cleaner fuels (Nussbaumer et al., 2012; Charlier and Legendre, 2018), (Charlier and Legendre, 2019). Nussbaumer et al. (2012) develop a new measure of energy poverty based on Multidimensional Energy Poverty Index (MEPI). This index is based on deprivation of access to modern energy uses. Charlier and Legendre (2018) measure the energy poverty integrating poverty characteristics using the Fuel Poverty Index (FPI). In this paper, we shall focus on the second approach based on the households fuel selection.

   The energy ladder model assumes that households follow the maximizing utility function for the usage of cooking fuels, according to consumer behavior theory and budget constraint. Energy ladder hypothesis propose a sophisticated use of fuels as economic status improves (Hosier and Dowd, 1987). Fuel structure in the energy ladder is classified in: solid fuels (crop waste, dung and firewood); transition fuels (charcoal, coal, kerosene and ethanol); and modern fuels (LPG, NG and electricity) (Karimu, 2015; Schlag et al., 2008; Van der Kroon et al., 2013). Empirical evidences support the correlation between income and fuel selection and show that solid traditional and modern fuels generally used by low-income, middle-income and high-income households, respectively, particularly in rural areas (Arnold et al., 2006; Gupta and Kohlin, 2003). Cooking fuel preferences are based on ease of use, cooking velocity, cleanliness and efficiency (Hiemstra-Van der Horst and Hovorka, 2008), nevertheless, in urban and peri-urban areas in some developing countries, this hypothesis is not completely satisfied, particularly in fast-growing developing economies (Daurella and Foster, 2009; Joshi and Bohara, 2017). This energy transition process represents the so-called energy stack (Schlag et al., 2008). The empirical results show the existence of the energy stack, suggesting that households may have the possibility to choose among different types of fuels (Masera et al., 2000; Van der Kroon et al., 2013; IHA, 2017; Cheng and Urpelainen, 2014).

   Many studies based on empirical data have been conducted in Asia (Bonjour et al., 2013; Miah et al., 2009; Leach, 1987; Bahadur Rahut et al., 2014; Behera et al., 2015) and Africa (Davis, 1998; Hosier and Dowd, 1987; Pundo and Fraser, 2006; Ouedraogo, 2006; Hiemstra-Van der Horst and Hovorka, 2008; Schlag et al., 2008; Karimu, 2015). Other studies have been conducted to determine the access to modern fuels in rural households (Baquie and Urpelainen, 2017; Joshi and Bohara, 2017) and to understand the determinants of household use of cooking fuels (Behera et al., 2016; Bahadur Rahut et al., 2014). Besides, several papers have contributed to the existing literature on the application of Multinomial Logit Regression models (MLR) (Logistic Regression, Dichotomous, Polytomous) to explain consumer behavior of cooking fuels. For instance, a study developed using the Bhutan Living Standard Survey allowed for the identification of the socioeconomic aspects that govern the selection of cooking fuels in Ghanaian households (Karimu, 2015). (Behera et al., 2016) applied an MLR model to the data of four African countries and determined some socioeconomic factors involved in the use of electricity for cooking. Related to studies have reported on the household use of cooking fuels applied to Latin American countries (Troncoso and da Silva, 2017; Troncoso et al., 2007; Calvo-Gonzalez et al., 2015; Poveda Burgos et al., 2018). Nevertheless, particularly in the Andean countries (Colombia, Venezuela, Peru and Bolivia) we do not have knowledge about similar studies.

   1.1 Aim of study

   The contribution of this paper to the existing literature is threefold. First, the paper aims to study the positive impact of an energy policy related to substitution of solid for cleaner fuels such as LPG and NG in residential cooking use in Colombia. Second, we present details to determine the main socioeconomic factors that governing the cooking fuel preferences of Colombian households during the years 2010 to 2016. Third, we apply a Multinomial Logit Regression model (MLR) that employs categorical variables to identify socioeconomic aspects and their relationship with household fuel consumption.

   The theory of the consumer acts as main approach because it can explain a demand function related to a utility-maximizing behavior. Consumer behavior can be derived considering a utility function faced with preferences on the consumption bundles, where the most preferred bundle will always be chosen. According to this, household demand for cooking fuel can be express as a utility maximization problem of preferences. On this basis, we present a empirical model describing the indirect utility function defined by observable and not observable variables. Moreover, the developed MLR model represents a mathematical approach that describes the functional relationship among a dependent variable and many explanatory or predictor independent variables.

   1.2 Colombian energy market

   Over the last 15 years, Colombia has experienced record levels of economic growth. It was Latin America's fourth largest economy by Gross Domestic Product (GDP) at purchasing power parity (PPP) in 2015 (IMF, 2017). Its exports are mainly based on mineral fuels including oil (54%); cofee, tea and spices (6.9%); gems and precious metals (5.3%); live trees, plants and cut flowers (3.8%); plastic articles (3.6%) and another goods (8.4%) (IMF, 2018). Colombia's GINI coefficient improved from 55.5 in 2010 to 53.5 in 2014. Nonetheless, Colombia is Latin America's second most unequal country (World Bank, 2017). Tables 1 and 2 present some of the most important socioeconomic and energy indicators of the country.

   In Colombia, there are large differences in human development conditions between large cities and rural areas. In 2014, 13% of the population of Colombia, about 6.5 million people, used traditional biomass for cooking. Colombia is an intermediate position in terms of the use of solid fuels in Latin America, for instance, in Argentina 0.2% of the population used traditional biomass for cooking, while in Guatemala, this number stood at 64% of the population (OECD, 2016).

   The structure of the Colombian energy market is based on Law142 of 1994 (Valencia Agudelo, 2004), which regulated public services in residential sector. The Unit for Mining and Energy Planning (UPME) is responsible for the study of future energy requirements and supply situations and the Regulatory Commission for Gas and Energy (CREG) is in charge of regulating the market. In the 1990s, the Colombian government launched the 'Program for mass use of NG consumption' (DNP, 1991) mainly in urban areas. This policy aimed to promote necessary actions for achieving a more balanced and efficient energy matrix. Two goals were proposed: substitution of dirty and inefficient fuels with NG and LPG in over 3.7 million households and construction of an NG network to connect the main gas production felds in the Caribbean and the Orinoquia regions with the interior of the country. Two additional actions were necessary for the mass use of NG: Law 142 (Congress of Colombia, 1994) on public services--establishment of The Commission for the Regulation of Energy and Gas (CREG)--and a new tarif methodology between the years 2000 and 2004 (Congress of Colombia, 2010). These regulations ushered in a unique system of cross subsidy scheme between populations with higher income and lower income.

   As result of Law 1151 of 2007 (Castaneda et al., 2007), the LPG supply in households increased significantly, especially in rural areas, thus allowing for the substitution of solid fuels such as charcoal, firewood and waste material. Another important aspect of Law 1151 (Castaneda et al., 2007) was the introduction of a brand...