Every year, hundreds of millions are spent on subsidies to help people in low- and middle-income countries use better stoves that emit less climate-warming carbon dioxide. But questions remain about whether that money is well spent, especially after a 2024 study estimated that clean cookstove projects were wildly overstating their environmental benefits.
A new paper from Wharton business economics and public policy professor Susanna Berkouwer sets the record straight. Their study with co-author Joshua Dean, professor at the University of Chicago Booth School of Business, finds that high-quality clean cookstove subsidies can be far more cost-effective at reducing carbon emissions than subsidies for electric vehicles or rooftop solar panels.
The study of more than 1,000 households in Nairobi, Kenya, calculated that cookstove subsidies for the ECOA Char stove abate carbon dioxide at $7 per ton. For comparison, it costs $1,356 in electric vehicle subsidies or $237 in rooftop solar subsidies to abate 1 ton of CO2e (carbon dioxide equivalent).
Berkouwer hopes the study will spur investment in clean cookstove subsidies by settling the question about whether the improved appliances really can make a difference in the fight against climate change. More than 200 million people around the world cook with charcoal because it’s cheaper and easier to obtain than electricity or other cleaner fuels.
“There’s so much money going into green innovation and technologies in higher-income countries, and we’re leaving a lot of opportunities on the table to invest more effectively in slowing climate change,” Berkouwer said. “A small change can have a much bigger impact than we realize.”
“A small change can have a much bigger impact than we realize.”— Susanna Berkouwer
How Cookstove Subsidies Compare to Others
The study relies on precise and independently collected data. Berkouwer and Dean used a randomized controlled trial — the gold standard in research — and measured charcoal consumption four different ways to ensure accuracy.
They also adjusted for additionality and impact, two features that can skew the results if not accounted for. Additionality is whether the subsidy actually increases sales, and impact is whether increased sales actually reduce emissions. Impact can be eroded by poor durability of the appliance, low use, or households stacking them alongside their old stoves. And additionality can be thrown off by the number of people who were planning to buy the improved stove regardless of the financial incentive.
Berkouwer uses the example of electric vehicles to explain additionality. The Inflation Reduction Act of 2022 offered a tax credit of $7,500 for the purchase of a new EV. The money certainly incentivized new buyers, but there were also buyers who planned to buy an EV anyway and just pocketed the savings.
“One of the criticisms about a lot of subsidy programs is that the money is going to people who were doing it anyway, so you’re not really changing behavior. But you can quantify that and take it into account,” Berkouwer said.
In their study, the professors determined nonadditionality was 16%. Even factoring that in, the total cost of subsidizing one additional cookstove was $32. More importantly, each dollar of the cookstove subsidy abated around 200 times more CO2e than an EV subsidy.
“When you think about it that way, cookstove subsidies have a negative cost of abatement: Every ton of CO2 abated saves us money.”— Susanna Berkouwer
Convincing a Skeptical Market
Berkouwer, whose research focuses on environmental and developmental economics, said the rigorous study methods can be applied to other carbon financing projects. The professor wants to see more empirical research that can drive better policies and greater investment in climate solutions, especially in the developing world.
“Every ton of CO2 is a ton of CO2, regardless of where it came from. What does the evidence say about how we should spend the money to reduce the most amount of CO2?” Berkouwer said. “Our research shows that subsidies for clean cookstoves can be among the most effective.”
Berkouwer also stressed the quality-of-life benefits that come along with the subsidies. The International Energy Agency estimates that 1.5 billion people will still be cooking with charcoal, wood, or kerosene by 2030. Improved cookstoves reduce the amount of money spent on fuel by households living in severe poverty. The study determined that the average household saves $284 over three years of ownership of an improved cookstove, money that can be spent on food, school, or medical expenses. They can also generate reductions in indoor air pollution, and reduce the time burden on women who collect firewood.
“When you think about it that way, cookstove subsidies have a negative cost of abatement: Every ton of CO2 abated saves us money,” Berkouwer said.
