Friday, May 01, 2015

Agri Econ 19: Charcoal Supply and Demand

An economist friend, Joey, made this cool observation about charcoal supply and demand.

... the bulk of users are the rural poor and not-so-poor in the urban centers. Most of the studies on charcoal and deforestation analyze the supply (production side) and hence, most solutions are on the supply side and they are costly and bound to fail. 

Two solutions on the demand side: (1) The price of LPG goes down that the price difference equates to the labor (intensive) effort in charcoal cooking, and (2) the poor and not-so-poor get more jobs and income that the opportunity cost of labor in charcoal cooking makes it pricey than using LPG. The not-so-easy solution (3) when people eat more vegetables (less fuel needed), and if the whole population demand it, will drive prices up that poor people will gladly substitute relatively cheaper meat products and cook with charcoal. 

I will stick with solutions 1 and 2. (1) depends on the international D and S of oil, (2) is the most workable in the medium and long term.

I think there is nothing wrong if demand for charcoal is high. It means many things.

High Demand: (1) the rural poor find the price of LPG as high, so charcoal and firewood become substitute fuel for cooking; (2) the not so poor are eating more grilled food -- inihaw na tilapia/bangus/pusit, pork chop, bar bq, etc.

Low Supply: (3) government (DENR, LGUs, PNP, etc.) are getting more strict in the cutting and transport of wood from public forest land, (4) charcoal makers are busy with other jobs like farming, rice harvesting and threshing, gathering bulo, rattan, other non-forest products; (5) rainy season, difficult to produce charcoal, gather and transport them with muddy off roads.

If #3 is maintained but #1 and 2 persists, then more bribery or plain "pakiusap" will happen so that #3 will be relaxed. #4 and 5 regularly happen and seasonal, short-term events.

We in private farms introduce #6 factor or solution, produce more charcoal/firewood from private forests, usually from branches and tree tops in regular pruning of trees, or excess parts from felled trees for lumber.

Bottom line is that high demand for charcoal is perfectly normal. What government should do is to encourage more private forestry, sell some of its huge "public forest/pasture land" because it has both no willingness and resources to really protect and manage all of them. Private forestry farms have the stake to make the land productive, protect the growing and mature trees for harvest or for conservation. They can lose money, directly or indirectly (lost income opportunities) if they will not protect and manage their land properly.

See also:
Agri Econ 15: Why do Thailand and Vietnam Produce More Rice than the PH?, January 27, 2015 

Agri Econ 16: Seeds for Mankind, February 27, 2015

Agri Econ 17: Why NFA Marketing Function Should be Removed,  February 28, 2015 

Agri Econ 18: Israel's Modern, High Tech Farming, March 17, 2015
Charcoal Economics, Part 2, November 28, 2014

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