Migrant remittances, Sustainable Development Goal (SDG) 7 and energy poverty in Sri Lanka

Abstract

Modern, clean energy is seen as the golden thread that connects economic growth, human development, and environmental sustainability. However, almost 2.4 billion people worldwide still use solid fuels for cooking, exacerbating energy poverty and endangering human health and the environment. Therefore, this thesis investigated the non-price determinants of cooking fuel choice, including the causal relationship between migrant remittances and both cooking fuel choice and energy poverty. Sri Lanka was used as a case study, using more than 78,000 households from four waves of the Household Income and Expenditure survey from 2009 – 2019. Specifically, this thesis includes three empirical studies and one policy paper related to remittances and energy consumption.

The first study found that household income, household wealth, household head’s characteristics (age, marital status and education), education of spouse, household characteristics (household size and number of children under 5), housing characteristics (number of bedrooms, drinking water source, and housing material), and residential sector (urban vs rural) were significant for selecting clean fuel for cooking, using multinomial logistic analysis. Moreover, the Advanced sustainability analysis showed a strong synergy between SDG 7 (clean energy), SDG 6 (Clean water), and SDG 4 (quality education).

The second study investigated the relationship between migrant remittances and cooking fuel choice by taking household wealth as a mediating variable. Using the propensity score matching method the study found that migrants used about 5.7% more clean fuels for cooking than non-migrant households. Furthermore, the control function approach found that a 1% increase in remittances increased clean cooking fuel use by 0.034 units, and instrumental variable (IV) mediation analysis indicated that household wealth significantly mediated this relationship.

The third study further explored the link between migrant remittances and energy poverty, using income inequality as the mediating variable. Two-Stage-Least-Squares (2SLS) regression results showed that a 10% increase in remittances decreased energy poverty by 0.042 units, while IV mediation analysis indicated that income inequality significantly mediated this relationship.

The final study examined the causes and economic implications of Sri Lanka's current energy crisis, its effect on energy poverty and the attainment of SDG 7. Specifically, the findings of the second and third studies were used to forecast the impact of a decline in migrant remittances of 40% due to the crisis on clean cooking fuel use and energy poverty. A 40% drop in remittances could reduce clean cooking fuel consumption by 0.16 units and increase energy poverty by 0.0016 units. The study concluded that Sri Lanka should encourage migrant remittances to enhance the use of clean cooking fuels and minimize energy poverty in light of the current energy crisis.