Insights from Latin America: Understanding swift clean fuel cooking transitions in Latin America

By Dr. Karin Troncoso (Loughborough University).

I joined MECS in October this year after almost 6 years working for PAHO/WHO on indoor air quality, with a focus on Latin America and the Caribbean. I want to share my experience working in LA because I believe that the region has traveled an interesting path in its transition to using clean cooking fuels for cooking, and Africa and Asia could benefit from this experience.

With a relatively low use of polluting fuels for cooking (15%), as compared to Africa (84%) and South-East Asia (65%), LA[1] has been a kind of testing ground for policies and approaches towards clean cooking, as a range of different approaches have been followed by the different countries with different results. Most LA countries have undergone the transition from biomass (mainly collected firewood, although some charcoal is used in some urban centres) to LPG successfully, and Costa Rica, Honduras (urban areas), and Ecuador have significant use of electricity for cooking. This blog is about the regional perspective across the continent, whilst in future blogs I will describe my experience in specific case studies and intersectoral work.

With most LA countries (15 out of 21) considered upper-middle or high-income economies (and only one is low-income), access to clean fuels for cooking in the region has been driven mainly by development and urbanization. However, LA is a very heterogeneous region in many ways, and access to clean energy for cooking is no exception. Argentina and Uruguay reached a level where more than 95% of their population were using clean fuels for cooking (CFU) as early as 2000, whereas by 2020, Honduras, Guatemala and Nicaragua still average less than 50% CFU, and in Haiti the level is less than 5% CFU. We can attribute this difference to circumstances related with the countries’ economy, level of rurality and forms of energy production (see Fig. 1).

There are however clear outliers: Ecuador has more CFU than Chile, but half the gross national income (GNI) per capita and 21% higher rural population. El Salvador has the same GNI per capita than neighbouring Guatemala, but twice the CFU. Bolivia has 82% CFU and Peru 76% CFU, with half the GNI per capita, 10% more rural population, double the percentage of indigenous population, and similar exports of natural gas.

There is little correlation between the GNI per capita and the CFU of each country. However, since the proportion of urban population is an important driver for CFU, by normalising CFU according to the percentage of rural population, a better correlation is obtained (see Fig. 2).

All countries above the line have higher CFU than expected, with Ecuador (EC) as the main outlier. Chile’’s (CH) CFU is lower than expected due to the use of firewood for heating in cold regions. The main difference between countries below and above the line is the presence of LPG fuel subsidy policies. The LPG fuel subsidies in Bolivia (BO) have allowed most of the population to have access to this fuel, despite the existence of cultural and economic barriers, which have shown to constrain the adoption of clean fuels in other countries. Likewise, LPG fuel subsidies may help explain the high CFU in El Salvador (SV) compared to its neighbours Guatemala (GT) and Honduras (HN). Subsidies have been particularly effective in switching urban USF towards LPG. Bolivia has 98% urban CFU. In comparison, its neighbour Peru (PE) has only 87% of urban CFU, despite many cultural similarities, and Mexico (MX) has 93%.

A difficulty when analysing the impact of LPG fuel subsidy policies is that they need to be contextualized, and may not be comparable, often differing in amount, the design of the policy, and the target population coverage. With regards to the subsidy amounts, for example, in 2013 the cost per kg of subsidised LPG was USD0.65 in the Dominican Republic, USD 0.60 in Brazil, USD 0.44 in El Salvador, and USD0.33 in Bolivia, but only USD0.13 in Ecuador and USD0.07 in Venezuela. This explains the almost complete transition to LPG in the last two countries. The Dominican Republic witnessed a substantial increase in CFU between 1990 and 2005 when a subsidy to LPG was in place. In 2008, the country replaced its subsidy policy by cash transfers to the poor. CFU had a relapse in 2011–2013 precisely when the price of LPG increased. This difference is not statistically significant, but highlights the price sensitivity of the LPG market and the weakness of this type of subsidy.

Subsidies are a huge economic burden for these countries, representing up to 7% of their GDP (IMF, 2015). Universal subsidies may disproportionally benefit the middle and upper classes that have higher access to LPG. In the case of Bolivia, universal subsidies have reached the poor in urban cities, but not many in rural areas, showing that despite the huge economic burden for the country, the subsidy is not reaching everybody. Many countries are seeking strategies to reform universal subsidies to better target the poorest population, as is the case of El Salvador. Since 1974, the government fixed the price of 12kg LPG cylinders at subsidized rates. The subsidy was large (only 35–40% of recovery prices were charged), untargeted and created smuggling problems. From 2011, the government started to give a subsidy (around 60%) to one cylinder per month directly to consumers, either through the electricity bill for small consumers or a special card for businesses and households without electricity. Given that the cash transfer was fixed, but the price of LPG was allowed to float, this new policy exposed households to volatility in the price of LPG. Because the payment was not linked to the purchase of LPG, households could use the money for other needs and return to solid fuel use. In 2013–2014, the government tightened the subsidy by requiring a registration in advance. The new payment system paid subsidies directly to LPG vendors when beneficiaries purchased the first LPG cylinder every month, providing their ID and entering a personal identification number in a special, program-specific mobile phone. Around 70% of Salvadorians benefit from this subsidy. LPG subsidies accounted for about 0.6% of El Salvador’s GDP in 2013 (Toft et al., 2016; Calvo Gonzalez et al., 2015). Peru is following a similar path, with a targeted 30% subsidy for the first LPG cylinder per month, although studies show that this subsidy is not enough, and people are fuel stacking LPG with firewood.

Many countries in the region, including Guatemala, Honduras, Mexico, and Peru, have led national programmes to distribute improved biomass stoves. These programmes may help explain why these same countries are not switching to clean fuels as quickly as expected. In Mexico, it has been documented that some people stop using LPG once they have an improved biomass stove. From a health perspective, this is a leap backwards. On the other hand, countries that have had few or no improved biomass stove programmes, like Ecuador, Venezuela and El Salvador, have opted to provide subsidies to LPG, and thus have made progress in terms of access to clean fuels at a faster rate than expected.

In analysing LA policies, price seems to be the single most important adoption factor for using LPG for cooking. At current LPG prices, it is estimated that in most contexts the LPG subsidy needs to be 60% or more to allow a full transition. As could be expected, countries with higher expenditures on subsidies are those where subsidies have a universal reach, as is the case in Venezuela, Ecuador, and Bolivia. We can speculate that a targeted subsidy to the poorest could be more effective in the transition to clean technologies for cooking in countries like Bolivia, but this is not easily done. Both Ecuador and Bolivia have attempted to remove or reduce fuel subsidies but backtracked after widespread popular protests.

An important factor in the adoption of a new technology or fuel is the ability to manage the risks, both perceived and real. These include the time invested in learning to use the new technology, the possibility that it does not fit traditional cooking practices, concerns around safety, and the potential financial challenges of managing payments for the fuel using a different time schedule. Unless the economic situation of the poor improves substantially, subsidies and cash transfers will be needed to reduce these risks.  As the late professor Kirk Smith would say, subsidies are social investments and, if we consider the potential saving from preventing illnesses and deaths, they may well pay for themselves.

Latin America’s experience shows that even when there is access to a convenient fuel for cooking, the poor have needed economic incentives to make a complete transition to LPG. This highlights the importance of political will and of understanding the limited decision-making options that people living in poverty really have. At MECS, we have found convincing evidence that some appliances and technologies are a good option for those already buying biomass for cooking, but in order to achieve a full transition to clean fuels for cooking, it will be necessary to improve service quality, invest in infrastructure, and provide economic incentives to lower the risks–real and perceived by users. We need to start moving political will!

[1] Only Latin America and not the Caribbean is considered in this analysis as the small islands of the Caribbean follow very different energy consumption and access patterns.

[2] Normalised CFU=1-(1-CFU)/RP*RPav, where RP is the percentage of rural population, and avRP is the regional average. The graph and the correlation exclude Haiti. GNI in 1,000 USD PPP constant 2017. Country codes as per ISO 3166-1.