Encouraging biogas plant construction in Nepal using carbon revenues as interest rate subsidies and environmental income instead of purchase subsidies

Governments and project developers in developing countries can obtain substantial income from carbon revenues as households make the transition to clean energy technologies and reduce their greenhouse gas emissions. These revenues can be used in various ways to encourage further investments in clean energy. In this paper we examine the effectiveness of three alternative policy instruments for supporting this clean energy transition in relation to cooking with biogas plants in Nepal – carbon revenues as purchase subsidies on biogas plants, distribution of environmental income to households for continuing use of biogas plants, or interest rate subsidies related to purchases of biogas plants on credit. Thus far the sectoral focus has been on purchase subsidies, but these are increasingly declining in their effectiveness. Our results identify the effectiveness relative to government cost and carbon emissions reduction, from these three types of potential government policy. • Three alternative policy instruments are considered for encouraging the introduction of clean cooking technology in Nepal. • The technology is biogas for cooking stoves as a replacement for wood stoves. • Policies: subsidies on the purchase price, interest rate subsidies and the distribution of carbon revenues to stove users. • We show the government costs and the impact on greenhouse gas emissions. • The results may be useful for sustainable financing of household cooking in other countries.