Beneath The Surface
Why invest in energy? The missing milepost
ENERGY is an integral input to modern life. The lack of it could also thwart thumping victories with equal force. The energy crisis all over the world has already demonstrated it. In fact, per capita consumption of energy level would go to explain the level of development of a country.
Bangladesh is poor simply because it cannot provide its population with required energy so much needed to raise productivity and cost effectiveness. The higher the consumption, the greater is development. But household income level determines the range of fuel options. The various energy carriers form what is commonly referred to as an energy ladder. Each rung corresponds to the dominant fuel used by successive income groups. The lowest rung -- applicable by the poor -- is represented by wood, dung, and other bio-mass.
We are told that donor agencies are helping us in making modern energy available to households and enterprises. Especially I know of ADB's assistance in the distribution and transmission of gas pipelines to northern and southern part the country. However, discourses on the development of energy sector mostly hover around the economics of energy for reducing cost of cooking, processing and service sector activities, and for lighting houses, offices and other work places. By and large, the pace of energy expansion is linked to the pace of economic growth only -- and indirectly to poverty reduction. The impact of clean energy on factors like demographic transition is less pronounced in documents I have read so far. I shall highlight this point in the paragraphs below.
Pia Malaney (1999) succinctly summarises the nexus between energy, poverty and demographic trap which should appear before policy makers in their arguments for investing in energy. We want to postulate that one of the important factors for which modern energy (gas and electricity) should be made available to the poor is to contain the growth rate of population through reducing infant and child mortality rates as well as through improving women's health conditions. The poor are caught in a vicious circle of poverty trap where poverty leads to the use of traditional fuel that increases infant and child mortality rates and, in consequence, in high birth rates for meeting demand for child labour. We, paraphrasing a bit, present below some of the observations from Malaney that draws upon cross-country experiences of 108 countries of the world:
First, the traditional fuel use on infant and child mortality rates is positive, statistically significant and sizeable in magnitude. Impact on crude death rate (CDR) is positive but not significant. The result is consistent with the view that the negative consequences of indoor air pollution are disproportionately experienced by children who are physiologically most vulnerable to its effects.
Second, the statistically significant negative effects of traditional fuel use on life expectancy are higher on females than for males. It shows women have greater exposure to the effects of indoor pollution.
Third, fertility rates are positively and significantly associated with traditional fuel use as is crude birth rate (CBR). A 40% increase in traditional fuel use (which corresponds to the difference between traditional fuel use in Vietnam and Malaysia) translates on average into one extra birth per women over lifetime and an increase of 7 births per 1,000 population. The difference between CBR and CDR explains why traditional fuel use has positive and significant effect on population growth rate. The same 40% increase in fuel use translates into an increase of nearly a full percentage point increase in the population growth rate.
Fourth, the poor are being bound by the pattern of energy use that is associated with high infant and child mortality rate and with high birth rate maintained in part to meet demand for child labour.
Fifth, continued dependence on firewood or fuel depresses income and maintains rural poverty by: (a) time and money devoted to fuel collection, (b) harming the health of those who use it, and (c) abetting high birth rate.
To break the vicious circle, Malaney (1999) suggests that: (a) modern energy should be available to the poor through proper policies an programes and (b) access to credit should be there so that the poor can face fixed cost of availing modern energy. Be it gas or electricity, high fixed costs could crowd out the poor from availing such access.
We are aware of the fact that the Bangladesh government places high importance on the development of energy sector. But the argument on which projects are placed for approval misses the important point that modern energy could be an important tool for reducing fertility levels and hence population growth rates. Unfortunately, however, very little empirical support to this is available due to the lack of research. We can only expect that more resources should be devoted in researching on the missing mileposts.
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