Estimation of elasticities for domestic energy demand in Mozambique Maria de Fátima S.R. Arthur a, ⁎, Craig A. Bond b , Bryan Willson b a Electricidade de Mozambique, Av Zedequias Manganhela, 267, Predio Jat IV, 4th floor, Maputo, Mozambique b Colorado State University, Fort Collins, USA abstract article info Article history: Received 13 January 2009 Received in revised form 12 August 2011 Accepted 13 August 2011 Available online 22 August 2011 JEL classification: C1 D1 Q4 R2 Keywords: Price elasticities Income elasticities Domestic energy Households In Mozambique, households consume a mix of energy sources to satisfy their needs for lighting and cooking and, for wealthier households, other domestic necessities such as refrigeration. The domestic energy mix de- pends on the prices of the sources and on the capability of the household to invest in the energy-consuming appliances required to satisfy those needs. Based on data from a household survey carried out in Mozambique during 2002/3 (IAF), this paper calculates the price and the income elasticities of demand for domestic energy, using an econometric method developed by Deaton. The calculations are made for all households at the national level, differentiating for urban and rural households, and for the northern households of Mozambique. In the econometric formulation, proxies for the ownership of energy appliances per household are used, allowing a simple evaluation of the effects of asset ownership on the demand for energy. Own- and cross-price elasticities for five individual domestic sources are obtained: low-grade sources such as firewood and charcoal are less elastic (elasticities of -0.41 and -0.28 respectively) than candles, kerosene and elec- tricity (respectively -0.88, -0.79 and -0.60).Income elasticities are respectively 0.45, 0.32, 0.93, 0.84 and 0.69, placing firewood and charcoal as the less responsive to income variations and candles and kerosene as the most responsive. We also comment on the factors influencing domestic energy transition. © 2011 Elsevier B.V. All rights reserved. 1. Introduction In most Mozambican households, domestic energy demand is satisfied by a varied composition of sources, each with different end-uses and prices. In general, households consume biomass, such as charcoal, firewood and forest residues, for cooking, and kerosene for lighting. These low-grade sources do not support a wide range of uses in the domestic setting nor do they support income-earning activities. Consequently, the household's access to modern energy services is limited. Energy supply in general, and electricity in particular, are rarely cited as essential services for household development (Pachauri et al., 2004). Households consume energy directly in many aspects of their daily rou- tines (e.g. lighting and cooking), and indirectly through consumable goods (food, clothes, etc.) and services (e.g. water supply, education fa- cilities), that require energy inputs in their production processes. Not surprisingly, the lack of basic energy infrastructure in poorly developed rural areas is likely a factor of poverty, in Mozambique and in other de- veloping nations (Mozambique, 2001, 2004). Access to affordable higher-grade energy sources such as electric- ity, as substitutes for biomass, can benefit poor households in terms of time saving, cleanness and efficiency, and it allows a greater variety of end-uses, including the expansion of the income generation basis (Abdulai and CroleRees, 2001; Ellis, 1998). The substitution of biomass by electricity also benefits family health by reducing common hazards in poor households, such as the inhalation of partic- ulate and other emissions from biomass, accidental burns, fires, and the ingestion of kerosene and paraffin(Howells et al., 2005; Kadian et al., 2007; Smith et al., 1994; van Horen et al., 1993). Furthermore, modern energy sources are becoming increasingly competitive with biomass (Arthur et al., 2010) because forestry resources are at risk of depletion, particularly around urban areas, which results in increasingly high costs of domestic energy. Electricity is regarded as the most diverse and useful source, and offers the clean- est and safest energy supply in the household environment (although non-standard or damaged wiring can also constitute a health hazard) (Howells et al., 2005). The Electricity Law in Mozambique (Law 21/97 of 1st October 1997) called for wider access and a uniform tariff across the country, and introduced the ‘Social Tariff’ intended to allow the poor to consume electricity at subsidized rates (Arthur et al., 2010). However, access levels were still at 14% across the total population by the end of 2009 (EDM, 2009). So far, the enacted price regulations have been in- effective in increasing access and intensifying electricity consumption in the country, and the impacts of price changes on the demand for domestic electricity are still poorly understood. Energy Economics 34 (2012) 398–409 ⁎ Corresponding author. Tel.: + 258 823139200 (Mobile); fax: + 258 21328233. E-mail addresses: farthur@edm.co.mz, fatimaarthur@gmail.com (M.F.S.R. Arthur). 0140-9883/$ – see front matter © 2011 Elsevier B.V. All rights reserved. doi:10.1016/j.eneco.2011.08.006 Contents lists available at SciVerse ScienceDirect Energy Economics journal homepage: www.elsevier.com/locate/eneco