Environmental cost-effectiveness analysis of alternative rural energy programs in Ethiopia

Abstract

Existing studies on evaluating rural energy programs in developing countries have primarily relied on cost-benefit analysis (CBA). CBA is based on measurements made on tangible and monetized aspects of costs and benefits and largely ignores the non-marketable, environmental, and health effects of alternative energy programs. Measuring non-marketed benefits have been identified as a limiting factor to apply cost-effectiveness analysis. In this study, we quantified environmental non-marketed benefits associated with alternative rural energy programs in Ethiopia. To measure the environmental effects, we considered the traditional cookstoves as a baseline energy package to which improved cookstoves (ICS) and biogas energy can be compared. We develop a simple linear growth model to capture forest regeneration to account for the environmental effect of ICS and biogas. The Environmental Cost-Effectiveness Analysis (ECEA) results show that biogas is not environmentally cost-effective compared with the ICS. Our analysis has considered a zero-subsidy scenario. Hence, it is essential to subsidize biogas programs to make them environmentally cost-effective. This study's findings can be used to compare the different energy interventions and signal the importance of using cost-effectiveness analysis over traditional CBA in the design and implementation of energy programs.