Energy-Efficient Cookstove Subsidies
Introduction
Berkouwer and Dean (2026) analyze the cost-effectiveness of raising a subsidy on energy-efficient Jikokoa cookstoves in Nairobi, Kenya. The subsidized stoves deliver fuel cost savings to their recipients along with reductions in carbon emissions. These stoves cost $40, and the paper reports the MVPF of raising the subsidy from $14 to $29.
Willingness to pay was measured through a randomized control trial. Participants were randomly assigned a subsidy of $10 – $30, though most subsidies were in the range of $13-15 or $28-30. These remained hidden until participants stated their willingness to pay, at which point they were required to buy the cookstove if the price fell at or below their stated willingness to pay and were barred from buying it otherwise. This data enables two calculations of willingness to pay for the cookstoves at each subsidy level: the first uses only data from randomly assigned subsidies in the range of $13-15 or $28-30, and the second uses the complete distribution of randomly assigned subsidies to construct a demand curve for the Jikokoa cookstove.
The random assignment of subsidies in the RCT implies that stove adoption was random conditional on willingness to pay, which allows subsidy price to be used as an instrument for stove adoption. Using an instrumental variables approach, the paper determines the causal effect of the cookstove subsidy on charcoal consumption and expenditures.
MVPF = 25.0
Net Cost
The paper reports the cost of the subsidy per additional stove purchased because of the subsidy. For every Jikokoa stove bought by a marginal consumer – an individual who purchased the Jikokoa as a result of the change in subsidy but would not have otherwise – $29 is spent on subsidy that goes to the individual, and $3 is spent on the increase in subsidy for individuals who would have purchased the stove at the lower subsidy.
Willingness to Pay
There are three components of total societal benefit. For inframarginal recipients of the subsidy – people who would have purchased the stove before the subsidy was increased – the subsidy was valued as a transfer. For each cookstove purchased by a marginal consumer, approximately 0.2 cookstoves were purchased by individuals who would have bought the cookstove at the $14 subsidy. Thus the additional transfer value to inframarginal consumers per stove purchased by marginal consumers is 0.2 * ($29 – $14) = $3.
Marginal consumers value the reduction in fuel costs from using more efficient cookstoves. The paper makes this assumption because the RCT provides evidence that marginal consumers could not borrow the money required to purchase the stoves prior to the subsidy. Thus, even if marginal consumers were fully informed of the fuel cost-saving benefits of the Jikokoa stove, they were unable to act on that knowledge without the subsidy. The paper estimates that, on average, consumers save $256 on fuel costs per additional subsidized stove ($245 after accounting for the $11 post-subsidy cost of the stove).
Finally, the total societal benefit includes that of avoided climate damages. The paper estimates the causal impact of one additional stove sale on emissions as 4.6 tCO2e, and use a social cost of carbon of $120 USD to calculate the welfare benefit of emissions per stove to be 4.6 * $120 = $552.
Note that the per-stove savings are calculated using an expected lifespan of 3.1 years for the stove, which is a lower bound.
The total is then $3 + ($256-$11) + $552 = $800.
MVPF Summary
The MVPF of increasing subsidies on Jikokoa stoves from $14 to $29 is $800/$32 = 25.
References
Berkouwer, Susanna, and Joshua Dean (2026). “The Cost-Effectiveness of Clean Cookstove Carbon Mitigation after Adjusting for Additionality and Impact.” Climate Change Economics, 17(04), 2650008. DOI: https://www.worldscientific.com/doi/10.1142/S2010007826500089
Berkouwer, Susanna, and Joshua Dean (2022). “Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households.” American Economic Review, 112(10): 3291–3330. DOI: https://doi.org/10.1257/aer.20210766
Policy Features
- Category
- Environment
- Sub-Category
- Environmental Subsidies
- Beneficiary Type(s)
- Adults
- Average Age
- 37.24
- Average Income
- 24.26 USD per week (respondent income), 47.79 USD per week (household income)
- Country of Implementation
- Kenya
- Year of Implementation
- 2019
- Empirical Method
- RCT
- Research Type
- Primary
- Peer Reviewed
- Yes
- MVPF Publication Link
- www.worldscientific.com/doi/10.1142/S2010007826500089