Page 4 - Can Subsidies be a Tool for Strengthening the Improved Cookstoves Market?
P. 4
Policy Brief
What technology should be subsidized? efforts to promote forced-draft cookstoves than natural-
draft— unlike the current subsidization model of the UCA.
The UCA aims to promote improved biomass cookstoves The higher cost and lower proportion of subsidy in the
that burn with significantly lower emissions than its case of forced-draft cookstoves disinclines entrepreneurs
traditional counterpart. Further, it states that the from marketing these stoves, favouring cookstove models
programme aims to achieve health and climate benefits that are far less effective in achieving programme goals.
by disseminating improved biomass cookstoves in rural The current strategy of the programme must be reversed,
households. The type of cookstove technology has a direct to offer higher subsidies (or, at least equal in proportion to
impact on its emission levels. Past experience has shown the total cost as in the case of natural draft cookstoves) for
that poorly performing improved cookstove technologies better performing forced draft cookstoves.
have low adoption rates and harm the market by reducing
buyers’ confidence.9, 10 The present model of subsidization Policy Recommendations
under the UCA has two tactical problems: (a) the subsidy
is invariable by cookstove performance—a superior forced 1. Targeting subsidies to all value chain actors
draft stove would be as much subsidized as another forced
draft stove that barely scrapes through the performance Subsidies under the UCA are currently directed at a single
standards; and (b) while the subsidy ceiling of `400 covers entity in the improved cookstoves value chain. This limits
nearly 30 per cent of the average cost of natural draft the participation of other value chain stakeholders, such as
stoves in the Indian market, the subsidy ceiling of `800 NGOs, financial institutions, and retailers, who play crucial
covers only nearly 20 per cent of the average cost of forced roles in the improved cookstoves market. Subsidies must
draft stoves—clearly disfavouring the deployment of the be apportioned across the value chain, making them activity-
latter. The former problem disfavours the development of specific instead of actor-specific, directed to activities that
advanced forced-draft stoves with lower emission levels, as are essential for strengthening the market. Activities such
they may cost higher than the currently available stoves and as awareness generation, providing consumer finance,
yet will be eligible for the same subsidy amount. Promoting providing after sales-service and transportation of improved
development of more efficient cookstove technology and cookstoves may be undertaken by diverse stakeholders,
seeding the market with high-quality improved cookstoves and must be subsidized for holistic value chain development.
would require a discriminatory subsidization strategy. In a disorganized market, it may be erroneous to assume
In effect, the ceiling of permissible subsidy for an improved that subsidies will have a cascading effect across the value
cookstove must be commensurate to its performance in chain if it is directed to a single value chain stakeholder.
terms of efficiency and emission levels.
2. Setting the manufacturing cost as the limit
TERI’s research has shown natural draft stoves perform for subsidization
poorly compared to forced-draft stoves, sometimes as
poorly as traditional stoves, when it comes to reducing Subsidies must ideally cover supply-chain related costs,
particulate matter (responsible for health affects) and so that end users can purchase improved cookstoves at
black carbon (a climate-forcing agent) emissions.11,12 its manufacturing cost. Increasing subsidies beyond this
In view of the broader goals of the UCA pertaining to point may prove to be counterproductive. If the cost of
health and climate benefits, there should be greater the improved cookstoves dramatically increases after the
termination of the UCA, the demand for improved cooking
9 Mobarak, Ahmed Mushfiq, et al. Low demand for nontraditional technology may substantially reduce. Concerted efforts must
cookstove technologies. In Proceedings of the National Academy of be made to bring down the cost of production and supply-
Sciences 109.27(2012): 10815–10820. chain related costs such as taxes and transportation costs so
that by the end of the programme, the selling price of the
10 Kishore, V. V. N., and P. V. Ramana. Improved cookstoves in rural cookstove attains parity with its initial manufacturing cost.
India: how improved are they?: A critique of the perceived benefits
from the National Programme on Improved Chulhas (NPIC). Energy 3. Higher subsidies for better technology
27.1(2002): 47–63.
UCA must adopt discriminatory subsidization to favour
11 Kar, Abhishek, et al. Real-time assessment of black carbon pollution in improved cookstoves that have higher efficiency and
Indian households due to traditional and improved biomass cookstoves. lower emissions than other models available in the
Environmental Science & Technology 46.5(2012): 2993–3000.
12 Arora, Pooja, and Jain, Suresh. Estimation of organic and elemental
carbon emitted from wood burning in traditional and improved
cookstoves using controlled cooking test. Environmental Science &
Technology 49.6(2015): 3958–3965
APRIL 2015 4
What technology should be subsidized? efforts to promote forced-draft cookstoves than natural-
draft— unlike the current subsidization model of the UCA.
The UCA aims to promote improved biomass cookstoves The higher cost and lower proportion of subsidy in the
that burn with significantly lower emissions than its case of forced-draft cookstoves disinclines entrepreneurs
traditional counterpart. Further, it states that the from marketing these stoves, favouring cookstove models
programme aims to achieve health and climate benefits that are far less effective in achieving programme goals.
by disseminating improved biomass cookstoves in rural The current strategy of the programme must be reversed,
households. The type of cookstove technology has a direct to offer higher subsidies (or, at least equal in proportion to
impact on its emission levels. Past experience has shown the total cost as in the case of natural draft cookstoves) for
that poorly performing improved cookstove technologies better performing forced draft cookstoves.
have low adoption rates and harm the market by reducing
buyers’ confidence.9, 10 The present model of subsidization Policy Recommendations
under the UCA has two tactical problems: (a) the subsidy
is invariable by cookstove performance—a superior forced 1. Targeting subsidies to all value chain actors
draft stove would be as much subsidized as another forced
draft stove that barely scrapes through the performance Subsidies under the UCA are currently directed at a single
standards; and (b) while the subsidy ceiling of `400 covers entity in the improved cookstoves value chain. This limits
nearly 30 per cent of the average cost of natural draft the participation of other value chain stakeholders, such as
stoves in the Indian market, the subsidy ceiling of `800 NGOs, financial institutions, and retailers, who play crucial
covers only nearly 20 per cent of the average cost of forced roles in the improved cookstoves market. Subsidies must
draft stoves—clearly disfavouring the deployment of the be apportioned across the value chain, making them activity-
latter. The former problem disfavours the development of specific instead of actor-specific, directed to activities that
advanced forced-draft stoves with lower emission levels, as are essential for strengthening the market. Activities such
they may cost higher than the currently available stoves and as awareness generation, providing consumer finance,
yet will be eligible for the same subsidy amount. Promoting providing after sales-service and transportation of improved
development of more efficient cookstove technology and cookstoves may be undertaken by diverse stakeholders,
seeding the market with high-quality improved cookstoves and must be subsidized for holistic value chain development.
would require a discriminatory subsidization strategy. In a disorganized market, it may be erroneous to assume
In effect, the ceiling of permissible subsidy for an improved that subsidies will have a cascading effect across the value
cookstove must be commensurate to its performance in chain if it is directed to a single value chain stakeholder.
terms of efficiency and emission levels.
2. Setting the manufacturing cost as the limit
TERI’s research has shown natural draft stoves perform for subsidization
poorly compared to forced-draft stoves, sometimes as
poorly as traditional stoves, when it comes to reducing Subsidies must ideally cover supply-chain related costs,
particulate matter (responsible for health affects) and so that end users can purchase improved cookstoves at
black carbon (a climate-forcing agent) emissions.11,12 its manufacturing cost. Increasing subsidies beyond this
In view of the broader goals of the UCA pertaining to point may prove to be counterproductive. If the cost of
health and climate benefits, there should be greater the improved cookstoves dramatically increases after the
termination of the UCA, the demand for improved cooking
9 Mobarak, Ahmed Mushfiq, et al. Low demand for nontraditional technology may substantially reduce. Concerted efforts must
cookstove technologies. In Proceedings of the National Academy of be made to bring down the cost of production and supply-
Sciences 109.27(2012): 10815–10820. chain related costs such as taxes and transportation costs so
that by the end of the programme, the selling price of the
10 Kishore, V. V. N., and P. V. Ramana. Improved cookstoves in rural cookstove attains parity with its initial manufacturing cost.
India: how improved are they?: A critique of the perceived benefits
from the National Programme on Improved Chulhas (NPIC). Energy 3. Higher subsidies for better technology
27.1(2002): 47–63.
UCA must adopt discriminatory subsidization to favour
11 Kar, Abhishek, et al. Real-time assessment of black carbon pollution in improved cookstoves that have higher efficiency and
Indian households due to traditional and improved biomass cookstoves. lower emissions than other models available in the
Environmental Science & Technology 46.5(2012): 2993–3000.
12 Arora, Pooja, and Jain, Suresh. Estimation of organic and elemental
carbon emitted from wood burning in traditional and improved
cookstoves using controlled cooking test. Environmental Science &
Technology 49.6(2015): 3958–3965
APRIL 2015 4
