Investigating the relationship between income, health and biomass consumption: a panel data analysis

The inverted-U shaped relationship between environment and economic growth has been well established in the environmental Kuznets curve (EKC) literature for several local air pollutants, such as suspended particulate matter. Very few studies, however, tested the EKC relationship for biomass consumption. About 2.5 billion people in developing nations depend on biomass fuels for household cooking and lighting. Most of these people are located in the rural areas and have lower income levels than national averages. Biomass fuels, although more easily accessible, are less efficient than other fuel types, and they cause adverse health impacts due to indoor air pollution. Within the households that use biomass fuels, women and children bear most of the health costs. This study employs panel data from 132 countries, from 1971 to 2004, in order to fulfil two aims: First, to test whether or not there is an EKC type relationship between biomass consumption and economic growth. Second, to investigate the impact of biomass consumption on household health, measured by life expectancy and infant mortality. We find a true EKC for biomass consumption with the turning – point occurring at a very low level of income per capita (US $119). After the turning point, it is hypothesised that countries switch to more efficient and less polluting fuel, and hence climb up on the ‘energy ladder’. Further panel data analysis reveals that biomass consumption (negatively) and income level (positively) affects the health status of a country. The results of the cross-sectional data analysis reveal whether or not an EKC type relationship can be found depends on the year of data and econometrics technique utilised. We find that panel data fixed effect estimation method is superior to the cross-sectional data ordinary least square method in establishing the EKC type relationship for biomass consumption. The results of the panel data analysis reported in this study reveal that developing countries cannot wait for economic growth to take place to reach the turning point as a policy solution. The problem of biomass consumption should be tackled at early stages of economic growth since the health benefits brought about by economic growth can be negated by adverse health effect of biomass use. We therefore recommend that developing countries should focus on economic policies on an energy limb to alternative sources of energy, such as solar thermal energy. Such policies would not only eliminate the negative impacts of biomass consumption on health, but also enable prevention of reliance on intermediate fuels such as fossil fuel, which have been found leading to global climate change.