Shaking things up: Do seismic shocks affect energy choices?

Abstract

Understanding how economic agents alter their energy consumption in response to seismic shocks has direct implications on the economic cost of natural disasters. This article exploits variation in peak ground acceleration from the 2015 earthquake in Nepal to investigate the impact of seismic shocks on household energy choices. Results from a difference-in-differences research design show that households exposed to large seismic shocks were 40.83% more likely to use firewood for cooking after the earthquake. This increase in the use of traditional fuel coincided with a decrease in electricity expenditure and a reduction in adoption of gas cylinders for cooking purposes. Unit prices of firewood also decreased significantly in response to seismic shocks, causing households in earthquake-affected districts to rely more on firewood as a source of cooking fuel. Results further illustrate that household consumption in electricity and kerosene for lighting declined in earthquake-affected districts. These findings conclude that large earthquakes induce poor households to use traditional fuel, exacerbating their transition to modern energy sources. Policymakers working on sustainable economic growth need to consider these disaster-induced changes in energy outcomes to ensure a successful implementation of commitments made under the Paris Agreement (COP21).