Electrification and Cooking Fuel Choice in Rural India

This study investigates the causal link between electrification and the adoption of modern (and cleaner) cooking fuels, more specifically Liquefied Petroleum Gas (LPG). In order to correct for the potential endogeneity, we exploit an instrumental variables approach that allows us to capture the part of the variation in electrification which is not related to factors that are also likely to affect a household’s choice of cooking fuel. Our instrument interacts state-level supply shifts in hydro-electric power availability with the initial level of electrification of each district. The results are consistent with an expansion of households’ choice set under a fixed budget constraint. We find that electrification leads to an increase in the probability of adoption of (free) biomass fuels and a decrease in the probability of adoption of (costly) modern cooking fuels. These results are statistically significant only for the poorest 50% of households in our sample, while they become statistically insignificant when we move to the richest 50%. The same is true for the share of expenditure in a specific fuel. These results seem to indicate that electrification by creating an additional strain on households’ finances pushes them back on the energy ladder.