Household fuelwood demand and supply in Nepal's tarai and mid-hills: Choice between cash outlays and labor opportunity

Abstract

Subsistence households are a leading source of deforestation and their consumption of fuelwood, in particular, is important in many developing countries. Yet the empirical economic examinations of fuelwood consumption are sparse, particularly for rural areas where the deforestation occurs, and we would argue that forest policy is often designed without a good understanding of the potential responses of subsistence households to the new policy. This paper addresses these issues with household evidence from the two major populated regions of Nepal. Market prices, labor opportunities, the availability of substitutes, and measure of access to the basic resource are the most reliable predictive variables for fuelwood consumption and production. There are, however, regional differences and important distinctions between the elasticities of fuelwood collecting or purchasing households with respect to these predictive variables. The difference between collecting and purchasing households is notable. It recommends forestry policies that target the labor opportunity and the physical resource in regions where collecting households dominate, and policies that affect the fuelwood market itself in regions where purchasing households are important. A second interesting finding is that fuelwood is relatively scarcer (prices are higher) in the mid-hills, and both collecting and purchasing households in this region are beginning to respond to deforestation by using their own land for fuelwood production.