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Is Nepal's Renewable Energy Subsidy Reaching Poor People of Rural Areas? A Study of Biogas and Solar Home Systems

Dipendra Bhattarai

No 115, Working papers from The South Asian Network for Development and Environmental Economics

Abstract: The Government of Nepal has been providing financial support to promote biogas technology since the 1970s and Solar Home Systems (SHS) since the 1990s. This paper analyse data from the Nepal Living Standard Survey for the year 2010/11 to determine the extent to which these programs have reached the poor. Only 5 percent of households eligible for a biogas subsidy have adopted biogas. Only 2 percent of biogas adopters are below the poverty line, as compared to a poverty rate of 19 percent in all of Nepal. The probability of biogas adoption is increasing in annual per capita consumption. The adoption rate is much higher for SHS with 27 percent of the households eligible for a subsidy having adopted Solar Home Systems. About 25 percent of adopters are below the poverty line, as compared to a poverty rate of 19 percent in all of Nepal showing that the SHS subsidy program reaches many more of the poor than the biogas subsidy program. The proportion of SHS adopters increases some what with an increase in annual per capita consumption upto the median and then falls steeply. The findings suggest that thegovernment's subsidy for biogas has not reached the low-income population and to do so, the existing subsidy delivery mechanism would have to be rethought. The SHS subsidy has done much better in this regard. The paper discusses the reasons behind the differences.

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