Assessing Wood-Energy Pricing Policies in Urban Ouagadougou (Burkina Faso)

Abstract

Burkina Faso has been running many interventions in the energy sector over the last decades. Still, there is a dearth of reliable and ready available price and income elasticities of demand to base these on, especially for domestic use of traditional fuels. The paper uses an Almost Ideal demand system (AIDS) model to explain the failures of wood-energy pricing and substitution policies. With the consumers’ preferences strong separability assumption, income elasticities of AIDS model are estimated; the use of the formula of Frisch (1959) allowed computing own- and cross-price elasticities. A relative inelasticity is observed for.wood-energy demand compared to households income and fuel price. This low sensitivity of the wood-energy compared to its own price and households’ income confirms the strong dependency of these households to fuel wood. Moreover, hicksian cross price elasticities between wood-energy and other fuels reveal substitution relations. The low income and own- and cross-price elasticities of wood-energy explain why substitution and price policies do not operate well and have a very weak impact on the fall in the demand of the wood-energy.