Edited by Joanne Evans and Lester C. Hunt
Chapter 31: The Economics of Energy in Developing Countries
Reinhard Madlener* 1 Introduction The social, economic and environmental development of many developing countries (DCs)1 is threatened by a lack of sufficient, reliable and sustainable supplies of energy. By improving health and education, access to energy contributes both to social development and the productivity of labour and capital, and thus also fosters economic development (Auer, 1981; Dunkerley, 1985; Pachauri and Pachauri, 1985; IEA, 1994). Training and education enabled by the provision of modern energy services are important prerequisites for a prosperous broader economic development, ‘requiring far-reaching legal, institutional and regulatory reforms’ (Birol, 2007, p. 5). In the presence of rising fossil energy prices and increasing prices for capital-intensive energy infrastructures (for example, power generation plants, distribution grids, oil refineries), as experienced in recent years, economic problems of many DCs (especially those chronically short of foreign currency) are likely to grow again considerably. Climate change issues and the overutilisation of traditional fuel sources beyond sustainable levels pose new additional restrictions and aggravate the problem further. As many as 1.6 billion people in DCs have no access to electricity today. Some 2.5 billion people (or 40 per cent of the world’s population) – especially in rural areas, where population growth is high, incomes low, and increases in agricultural productivity crucial for the entire country concerned – are dependent on non-commercial (‘traditional’) fuels, such as fuelwood, charcoal, agricultural crop residues, and animal dung. A major problem is that the efficiency of using non-commercial biomass is particularly low (for example, indoor cooking). Whereas the number...
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