Rising wages and energy consumption transition in rural China

Abstract

Residential energy consumption in rural China is undergoing a transition from traditional biomass energy to modern commercial energy. This paper examines the impact of rising wage rates on energy consumption mix in rural China. Using a unique panel data set from our two-round surveys of 409 rural households in 4 provinces, the results show that the wage rate at the village level has a significant negative impact on traditional biomass energy consumption and significant positive effects on consumption of electricity and new renewable energy in rural China. As traditional biomass energy is mainly collected with family labor and is relatively labor intensive, an increase in rural wage rates would enhance the opportunity costs of traditional biomass energy, leading to a reduction in biomass energy consumption. Continuously rising rural wage rates could accelerate the transition from biomass energy to electricity in rural areas. These findings could have important policy implications, not only for indoor air quality and environmental and health issues in rural areas but also for greater security in rural energy supply and policies to incentive farmers to better utilize biomass resource after harvest.