Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households

We study an energy efficient charcoal cookstove in an experiment with 1,000 households in Nairobi. We estimate a 39 percent reduction in charcoal spending, which matches engineering estimates, generating a 295 percent annual return. Despite fuel savings of $237 over the stove's two-year lifespan-and $295 in emissions reductions-households are only willing to pay $12. Drawing attention to energy savings does not increase demand. However, a loan more than doubles willingness to pay: credit constraints prevent adoption of privately optimal technologies. Energy efficient technologies could drive sustainable development by slowing greenhouse emisO13, O32, Q54)

Automated summary

We conducted an experiment in Nairobi, studying the energy efficient charcoal cookstove. The results show significant reduction in charcoal spending and a high annual return. However, households are only willing to pay a small amount for the stove. Loan availability increases willingness to pay, indicating credit constraints as a barrier to adopting optimal energy efficient technologies. Energy efficient technologies are crucial for sustainable development.