Impact of Household Income on Impact of Household Income on Energy Patterns in BotswanaEnergy Patterns in Botswana::

Implications for Economic Growth and Implications for Economic Growth and Forest Biodiversity Conservation.Forest Biodiversity Conservation.

Charity K. Kerapeletswe

Botswana Institute for Development Policy Analysis (BIDPA)

Objectives of StudyObjectives of Study To establish fuel-specific consumption patterns of To establish fuel-specific consumption patterns of

income groups in Botswanaincome groups in Botswana

To assess the effect of increase in household income To assess the effect of increase in household income on household energy consumption patterns on household energy consumption patterns Investigate whether the energy ladder hypothesis apply to Investigate whether the energy ladder hypothesis apply to

households in Botswanahouseholds in Botswana

To establish factors that contribute to choice of energy To establish factors that contribute to choice of energy sources in Botswana and assess implications for forest sources in Botswana and assess implications for forest biodiversity and economic growth biodiversity and economic growth

Theoretical BackgroundTheoretical Background

The energy–economic growth (GDP) relationship - The energy–economic growth (GDP) relationship - energy is an input energy is an input in the growth and development process (Reddy, 1998;in the growth and development process (Reddy, 1998;

Studies from developing countries generally reveal that the that Studies from developing countries generally reveal that the that households climb the energy ladder as their income increases (Jack, households climb the energy ladder as their income increases (Jack, 2004; Barnes et al.,1998; Davis, 1998)2004; Barnes et al.,1998; Davis, 1998)

Bardhan et al (2002) provide evidence from Nepal that suggests that Bardhan et al (2002) provide evidence from Nepal that suggests that households may not climb the energy ladder if supplies of cleaner fuels households may not climb the energy ladder if supplies of cleaner fuels are lacking are lacking

Some studies of forest use have demonstrated that demand for biomass Some studies of forest use have demonstrated that demand for biomass energy especially firewood, have direct relationship with household energy especially firewood, have direct relationship with household income up to an income threshold level, after which households switch income up to an income threshold level, after which households switch cleaner fuels. (Chaudhuri and Pfaff, 2003; Rosenzweig and Foster, 2003; cleaner fuels. (Chaudhuri and Pfaff, 2003; Rosenzweig and Foster, 2003; Leach, 1992). Leach, 1992).

MethodologyMethodology Household Energy Consumption Survey Household Energy Consumption Survey in 2006 in 2006

1500 urban households 1500 urban households Area classified as urban if 75% of inhabitants Area classified as urban if 75% of inhabitants

derive livelihood from non-agricultural sourcesderive livelihood from non-agricultural sources1000 rural households1000 rural households

Data analysis employs descriptive statistics Data analysis employs descriptive statistics and econometric models and econometric models

Botswana BackgroundBotswana Background Often hailed as Africa success Often hailed as Africa success

story of economic growth-one of story of economic growth-one of the poorest in 1966; middle the poorest in 1966; middle income by 1997income by 1997

Narrow economic base (mining – Narrow economic base (mining – more than 30% of GDP)more than 30% of GDP)

High unemployment of about High unemployment of about 24%24%

High incidence of HIV/AIDS High incidence of HIV/AIDS (32.4% in 2006) (32.4% in 2006) eroding the previous social eroding the previous social

development achievementsdevelopment achievements Contributing to increase in Contributing to increase in

incidence of poverty through loss incidence of poverty through loss of household bread winnersof household bread winners

Economic Performance

-202468

1012

1990

1992

1994

1996

1998

2000

2002

2004

2006

Gro

wth R

ate

Botswana Settlement PatternsBotswana Settlement Patterns

0

20

40

60

80

10019

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

06

Per

cent Urban

Rural

•Increase in urban population may increase demand for energy given the energy-intensive lifestyles•There the may be increased energy switching from biomass to cleaner energy sources

Head Count Ratio (1985-2006)

0

10

20

30

40

50

60

Perc

ent (

%)

48.21 37.21 32.89 30.2

1985-86 1993-94 2002-03 2005-06

Poverty and Rural/Urban Poverty and Rural/Urban SplitSplit

Incidence of poverty is high in Incidence of poverty is high in rural areasrural areas

Incidence of poverty is more Incidence of poverty is more than 20% in urban areas than 20% in urban areas except in Jwaneng (mining except in Jwaneng (mining town; 3.16) and Gaborone town; 3.16) and Gaborone (capital city; 6.79%)(capital city; 6.79%)

(2003); And 30.2% (2006)

00.10.20.30.40.50.60.7

1998 2000 2002 2004 2006 2008

Gin

i Coe

ficie

nt

Skewed income distribution

poorest 40% of the population receiving 12% of total income

middle 40% receive 29% of total income and

richest 20% receive 59% of total income.

Botswana Energy Policy FrameworkBotswana Energy Policy Framework

Vision 2016(1997)

NDP7(1991-1997

NDP8(97/98-2002/03)

NDP9(2003/04-2008/09)

BEMP 1996(1985-1996)

BEMP 2004Energy policy

2005

•National Development Plans 7-9 and Botswana Energy Master Plan (BEMP of 2004) emphasize rural electrification

•Vision 2016 seeks to expand electricity to all by 2016

Botswana Energy PolicyBotswana Energy Policy

14

323033

0

10

20

30

40

coal fuelwood solar electricity petroleum

Energy Carrier

Electricity GenerationElectricity GenerationFigure 4.5 Electricity Supplied(1995-2005)

0

500000

1000000

1500000

2000000

2500000

1994 1996 1998 2000 2002 2004 2006

years

amou

nt o

f ele

ctric

ity(M

W)

local generationImport Demand

Botswana Power Corporation has sole responsibility for power generationRatio of local generation to imports is 25:75 percent

05

1015202530354045

Sectors

% c

onsu

mpt

ion

total Energy Consumption

commercial energy consumption

Final Energy Consumption by Sector

•Household sector is the biggest energy consumer of energy•Major source of energy for household sector is non-commercial

Preliminary FindingsPreliminary Findings

Energy and economic growth in BotswanaEnergy and economic growth in Botswana

2002

2006

2001

2003

2004

2005

0

1000

2000

3000

4000

5000

6000

7000

0 500 1000 1500 2000 2500

Household Energy Consumption per capita (kWh)

GDP

Per

Cap

ita (U

S$)

Household Energy Household Energy Consumption in BotswanaConsumption in Botswana

Sources of Energy Sources of Energy for Households in for Households in 20062006 FuelwoodFuelwood Liquid Petroleum Gas Liquid Petroleum Gas

(LP Gas)(LP Gas) ElectricityElectricity

Households spend 24% Households spend 24% of household income on of household income on energyenergy

0102030405060708090

100

Series1 66 23 22

fuelwood LPG Electricity

Household Connection to Household Connection to National Electricity GridNational Electricity Grid

0

5

10

15

20

1981 1996 1997 1998 1999 2000 2001 2002 2003

Year

%of

con

nect

ed h

ouse

hold

s Rural

Urban

Total

•At national level only 22% of households are connected to electricity•43.3% of urban households are connected to national grid•17.1% of rural households are connected to national grid

Fuel Use Patterns by Income GroupFuel Use Patterns by Income Group

0

10

20

30

40

50

60

70

80

Fi r ewood 66 46 37 32 18 40

C har c oal 0 0 0 0 0 0

K er os ene 9. 7 10. 7 8. 5 3. 3 4. 9 7. 4

G as 22. 6 42. 9 52. 5 63. 9 70. 5 50. 5

E l ec tr i c i ty 0 0 0 1. 7 6. 6 1. 7

Q1 Q2 Q3 Q4 Q5 T otal

Use of Electricity for Cooking by Use of Electricity for Cooking by Income GroupIncome Group

0

1

2

3

4

5

6

7

8

% o

f hou

seho

lds

Electricity 0 0 0 1.9 7.3 2.1

Q1 Q2 Q3 Q4 Q5 Total

Use of Fuelwood for Cooking by Use of Fuelwood for Cooking by Income GroupIncome Group

0

10

20

30

40

50

60

70

% o

f hou

seho

lds

Fuelwood 66 48 37 33 18 40

Q1 Q2 Q3 Q4 Q5 Total

Use of Gas for Cooking by Income Use of Gas for Cooking by Income GroupGroup

0

10

20

30

40

50

60

70

80

% o

f hou

seho

lds

Gas 22.6 42.9 52.5 63.9 70.5 50.5

Q1 Q2 Q3 Q4 Q5 Total

Factors that Influence Energy ChoiceFactors that Influence Energy Choice

5

4321

0

10

20

30

40

50

60

70

80

90

100

% o

f hou

seho

lds

Household Energy ConsumptionChoice

90 85 70 40 65

Household Income

Access to energy

infrastructure

Cost of energy alternatives

Household size

Cultural factors

Preliminary conclusionsPreliminary conclusions Increase in income (GDP per capita) increase energy consumption per capita – this may Increase in income (GDP per capita) increase energy consumption per capita – this may

not directly increase demand for cleaner energy sources duenot directly increase demand for cleaner energy sources due Skewed income distribution which limits poor households in switching from fuelwood use to Skewed income distribution which limits poor households in switching from fuelwood use to

commercial fuelscommercial fuels High unemployment rate due to undiversified economy limit household income generating High unemployment rate due to undiversified economy limit household income generating

capacity and hence switch to commercial fuelscapacity and hence switch to commercial fuels High incidence of poverty and HIV/AIDS limit ability of households to expand income sources and High incidence of poverty and HIV/AIDS limit ability of households to expand income sources and

switch to commercial fuels switch to commercial fuels

Households in Botswana are multiple energy users; with fuelwood and gas being used to Households in Botswana are multiple energy users; with fuelwood and gas being used to energy intensive uses (e.g. cooking)energy intensive uses (e.g. cooking) Rural electrification program adds electricity to household energy portfolio without promoting Rural electrification program adds electricity to household energy portfolio without promoting

energy switching due to high tariffsenergy switching due to high tariffs

Electricity is hardly used for energy intensive uses even among households which are Electricity is hardly used for energy intensive uses even among households which are connected to national gridconnected to national grid Electricity is used mainly for lighting and powering mediaElectricity is used mainly for lighting and powering media Only the 1.9% and 7.1% of the fourth and fifth quintiles respectively use electricity for cookingOnly the 1.9% and 7.1% of the fourth and fifth quintiles respectively use electricity for cooking There is limited access to electricity especially in rural areas and this limits its useThere is limited access to electricity especially in rural areas and this limits its use

There is some energy switching fuelwoodl and gas at a threshold of P24000 annual There is some energy switching fuelwoodl and gas at a threshold of P24000 annual income and aboveincome and above

The choice of energy source is influenced by multiple of factors but household income The choice of energy source is influenced by multiple of factors but household income dominates dominates

Implications for Forest Conservation Implications for Forest Conservation and Economic Growthand Economic Growth

Increase in energy consumption resulting from increase in economic growth is Increase in energy consumption resulting from increase in economic growth is likely to put pressure on forest resourceslikely to put pressure on forest resources There localized forest degradation around urban centersThere localized forest degradation around urban centers Responding to shortage of fuelwood people resort to cutting life trees forgoing other Responding to shortage of fuelwood people resort to cutting life trees forgoing other

forest benefitsforest benefits Increased use of fuelwood has implications for health through indoor pollutionIncreased use of fuelwood has implications for health through indoor pollution

Forest conservation measures should be associated with poverty reduction Forest conservation measures should be associated with poverty reduction measures as well as target different income groupsmeasures as well as target different income groups

Limited use to commercial fuels limit economic growth and rural developmentLimited use to commercial fuels limit economic growth and rural development Small and medium enterprises (SME) that are usually initiated at house level require Small and medium enterprises (SME) that are usually initiated at house level require

energy infrastructureenergy infrastructure SME have potential to catalyze rural developmentSME have potential to catalyze rural development Employment creationEmployment creation Poverty alleviationPoverty alleviation

Without adequate infrastructure and improvement in wellbeing of households, Without adequate infrastructure and improvement in wellbeing of households, SME potential contribution to economic and social development is constrainedSME potential contribution to economic and social development is constrained There need to expand the rural electrification programThere need to expand the rural electrification program Improve uptake of economic support programs to facilitate SME developmentImprove uptake of economic support programs to facilitate SME development