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Abstract

This dissertation presents three essays on Environmental Economics and Energy Transition, focusing on the use of solid biomass in households. The first essay investigates the persistence of firewood use despite rising household incomes. The second explores how changes in firewood affect demand and air pollution, while the third examines the factors influencing households' decisions to switch from firewood to alternative heating fuels. In Chapter two, we estimate the income elasticity of firewood usage for residential heating in Chile, considering the country’s climatic, geographic, and socio-demographic diversity. The study controls for several fixed effects and covariates and addresses selection bias, recognizing that some households do not use any heating systems. Findings reveal that a 10% increase in income leads to a decrease in firewood use probability by approximately one-tenth of a percentage point, indicating a statistically significant but economically trivial effect. This suggests that expecting a shift away from firewood usage solely due to income growth is unrealistic. Chapter three explores the causal relationship between firewood prices and consumption, utilizing forest cover as an instrumental variable for prices. Using a novel dataset of municipal firewood consumption and prices linked with satellite-based forest cover and socio-demographic data. The analysis applies a two-sample instrumental variable strategy using a lagged distance-weighted measure of forest cover to instrument firewood prices. Results show that a 10% increase in firewood prices would decrease consumption by 6.7%. Additionally, it would lead to increased kerosene and electricity consumption and a reduction in PM₂.₅ emissions ranging from 3,000 to 67,000 tons annually. Chapter four expands on Chapter two by examining income effects across various fuel substitutes (electricity, natural gas, kerosene) and the influence of substitute fuel prices on heating choices. Using a multinomial probit model with 180,000 observations from Chilean socio-economic surveys (2015–2022), it finds that fuel prices have a more significant impact on transitions than income. Specifically, a 1% increase in electricity prices raises firewood adoption likelihood by 0.22 percentage points, while income effects remain minimal. These results indicate that price interventions may be more effective than income-based policies in achieving emission reductions.