Subsidies and Biogas Plant Installations in Kenya: A Case Study of the ABPP

Abstract

Biogas installations on smallholder farms can be seen as one of the limited methods of climate change mitigation from a developing county perspective. Through the Africa Biogas Partnership Programme, over 11,000 plants were installed, thanks to subsidies in the form of financial assistance to offset part of installation costs. After a short review of the literature surrounding subsidies in the domestic biogas sector, the paper investigates whether subsidy incentives are effective in increasing the installation of biogas digesters. Using a panel dataset from 42 counties in Kenya, a spatially explicit tobit model is used to derive estimates of the effect of the subsidies on installations. These results suggest that subsidies do play a major role in encouraging installations and the results further point to a significant positive relationship between the number of technicians, past performance, water availability and herd sizes and installations indicating the importance of these variables as predictors of installations. A 10% increase in subsidies is associated with a 5% increase in installed volume.

Keywords: biogas, spatial, panel data, tobit

JEL Classification: Q50, Q40, Q16