Household electricity consumption efficiency and poverty: Evidence from Ghana

Abstract

Improving energy consumption efficiency has the potential to reduce poverty in addition to reducing greenhouse gas emissions. However, very little is known about the impact of electricity consumption efficiency on poverty. Using data from a household survey, we estimate electricity consumption efficiency, multidimensional poverty, and consumption poverty among Ghanaian households. We then use an instrumental variable and probit models to estimate the impact of electricity consumption efficiency on multidimensional and consumption poverty respectively. The results indicate that a percentage increase in electricity consumption efficiency reduces multidimensional poverty by approximately 35.7% and 16.5% when the extreme and national poverty lines are considered respectively. Improvement in electricity consumption efficiency reduces extreme consumption poverty by about 9.1% but does not significantly impact consumption poverty measured by the national poverty line. This shows that multidimensional poverty can be highly reduced by improvement in household electricity consumption compared to consumption poverty. Households willing to take the risk of buying new electrical appliances significantly reduce the probability of being both multidimensional and consumption poverty. Higher educational qualifications reduce both consumption and multidimensional poverty. We recommend government to strengthen policy choices on demand-side management of electricity through the enhancement of energy efficiency programmes such as the Efficiency Standards and Labelling Programme through turn-in and rebate schemes that cover cooling appliances and develop regulations to cover other appliances. Efforts should also focus on improving access to education, roll-out mass information and training programmes on electricity consumption efficiency and conservation measures and encouraging households to take the risk to buy new electrical appliances. The government could also incorporate efficiency measures in poverty alleviation programmes like the Livelihood Empowerment Against Poverty in Ghana.