[Stoves] Chasing results is like dog chasing tail (Was: No subsidies in TLUD char peoduction)

[Nikhil Desai]

Crispin:

I would only assert that a comprehensive theory of incentives and assets
when it comes to household cooking is yet to be built.

There is NO problem with subsidies. Any subsidies that require very
intrusive information will invite gaming, corruption, and over-design of
subsidies, adding to the administrative cost of subsidies. (Yes, it takes
money to give away money and the academics who want to do their ridiculous
"Monitoring and Evaluation" in terms of trees and lives saved just add to
the overhead with very little return in terms of suggesting future changes
in subsidy programs or R&D programs).

Sure, "Virtually eliminating chronic underheating delivers palpable,
predictable health impacts." That can be validated in a pilot, but a
large-scale subsidy program must avoid monitoring of health impacts --
cannot be attributed to stove change -- or of reduction in health care
expenditures by the government (it is not  your business to monitor health
ministry plans and budgets). Leave all that "macro" stuff to academics with
time and money on their hands who can help with better subsidy design the
next time around. I have been through endless blather on subsidies; as far
as I am concerned, the debate is closed. Subsidize, but in an effective,
least market-distorting way.

I also find the Indonesia subsidy arrangement very similar to one used in
Solar Home Systems project design for Indonesia more than 20 years ago
(then became the routine for most other projects even as the Indonesia
project collapsed due to the currency crisis 20 years ago).

It is irrelevant that "The MA’s were free to subsidise the stove cost if
they wished – that was up to them." What is a "subsidy", for the umpteenth
time? Pricing strategies are linked to inventorying costs ("Clearance Sale
at 50% Off!") There is absolutely no way to foresee the MAs' distribution
margins and profitability, or dictate pricing strategies.

There is an anecdotal precedence in pricing in Indonesia as well. Indonesia
SHS dealers knew the development of the World Bank project for SHS and its
proposed subsidy scheme (roughly $100 per 50-Wp PV). Almost immediately
after the news spread that the Bank Board had cleared the project, SHS
prices in Indonesia dropped. Without moving a penny. The retailers had
figured out strategies for expanding sales and gaining or holding their
market share in a larger market. They were ready to compete on price and
brand.

That was proof enough to me for the efficacy of a simple capital subsidy
for retail products. But it was also because the Bank had pushed for and
got ISO standards for small PV/battery systems. The same does not apply to
the stoves theory of EPA because there is no case that a "standard" stove
will sell to a "standard" cook for a "standard" meal. Fundamental premises
of IWA/TC-285 are at fault. A stove is not a lightbulb. More importantly, a
stove is not a television or a phone with text and camera.

The Indonesia (and other) SHS subsidy idea preceded the creation of a more
general "Output Based Aid" approach at the World Bank, which then evolved
into this "Results Based Finance", which I find difficult to accept. For
one, what ARE the "results" and who gets to define them? Are aDALYs
"results"? Is a reduction in forest loss a "result"? Is Samer going to
chase women around all Potential Energy projects to prove or disprove that
fewer rapes occurred because of more efficient stoves? What are the
"results" that the cook wants, and why oveload them with results of your
fancy? (Except for climate finance; if it is going to be used to subsidize
the rich for rooftop PV or solar water heaters, might as well get that
money to the poor, though some of my colleagues did not like the idea that
the GEF help poverty alleviation.)

Stove advocates have wasted fifty years promising results that cannot be
attributed to mere stove changeout. Even when the "attributability" - of
deforestation, ill health, women's status, climate - is interpreted as
"causality" (for which there is no basis), it must be kept in mind that the
reverse causality may not exist.

I have reviewed enough "results matrix". Enough "logframe" or "zopping". I
am comfortable with output-based capital subsidy schemes, but rarely with
the "results-based" subsidies. The core theory of change is missing, or has
such assumptions and qualifications that render them vulnerable to cynicism
and the projects non-scalable.

As you move from pilot to scale, remember, one of the "results" to chase is
that necessary subsidies are sustainable.

Sustainability of subsidies? Don't laugh it off. Unless there are drastic
cost reductions - as have happened with pico-PV products and micro-storage
of information and power - subsidies will be needed to reach successively
deeper into the income pyramid.

When the external donors can scale up subsidies, or governments take them
over as part of routine budgeting, your technology interventions have
succeeded. THAT to me is the desirable "result"; I don't care for counting
trees, GHG emissions, or aDALYs. Enough of academic junk to have endless
discussions. Grab a pilot and go to scale; think of changes for the next
project. Some arguments have to stop when the Bank is ready to act.

Nikhil



On Tue, Dec 5, 2017 at 10:55 PM, Crispin Pemberton-Pigott <
crispinpigott at outlook.com> wrote:

> Dear Nikhil
>
> I am not proposing a comprehensive theory of investment, I am trying to
> understand how the TLUD+char system is being expanded (not established) and
> where the money goes, who gets it and for what return.
>
> >In economic terms, an investment is for future consumption.
> >In financial terms, an investment is purchase of an asset.
>
> There is a third indirect return which is from a governments point of
> view, a reduction in health care expenses for an investment in either
> product development that transforms a sector, or subsidising the cost of a
> stove or its installation or its distribution in return for less sickness.
> There I speak on the monetary cost, not the additional ‘improved life’ of
> someone who doesn’t get sick that winter, for example.
>
> If it costs $300 to equip a poor family with a highly improved stove and
> the predictable consequence is zero bronchitis for that and all subsequent
> winters, the ‘savings’ to government warrant the ‘investment’.  Getting a
> believable and predictable result from an intervention is key. In the case
> of the aDALYs claimed for lowering the “Relative Risk” supposedly created
> by a stove creating (supposedly) less PM, the proof is very shaky. For
> increasing the ambient average temperature in the home with a far better
> heating stove, the proof is in comparison, solid.
>
> Virtually eliminating chronic underheating delivers palpable, predictable
> health impacts.
>
> >In your example, "donations" are what might be called "patient
> investments" -- no particular schedule of returns and presumably not many
> trades either.
>
> Agreed. They could also be gifts motivated by a desire to assist someone.
> Many requests I get for donations are exactly that. Help someone to help
> themselves, etc. They just need a hand up. As you may know I have been
> manufacturing equipment for such development promotion organisations for
> decades.
>
> >You say the Central Java Pilot stove project made an "investment". How?
>
> Through the provision of a cash payment to any registered participant
> (Market Aggregator) that created a distribution system for approved
> products, the cash value of which was related to the performance of the
> stove on three metrics. The acceptability of the stoves was up to the MA
> selecting products appropriate for the market where they chose to
> ‘intervene’.
>
> >What legal form did the CJP project have,
>
> Contract between the Pilot and the MA’s.
>
> >whose money was it, and in what form and under what conditions was it
> given to the private companies?
>
> It was a grant to the Indonesian government from the WB, conducted as an
> experiment to see of this type of approach could establish a viable,
> unsubsidised supply chain selling acceptable stoves to the general public.
> The costs of establishing such a distribution chain and filling the channel
> could be what the money was used for. The MA’s were free to subsidise the
> stove cost if they wished – that was up to them. They were paid per stove
> placed and used, with definitions of use, and a use-detection mechanism
> contained in the contract.
>
> It falls under the term ‘Results Based Finance”. The money only changed
> hands after the stoves were sold and homes visited.
>
> >As soon as you are talking of private corporate entities, proper finance
> terms and laws become central.
>
> Well of course that is the intention of the experiment: to get away from
> handing out a limited number of stoves at a discount without regard for how
> the future supply was to be established, other than ‘begging for more
> donations’.
>
> I should point out that this plan was not my idea. I am a lowly technical
> consultant involved in the performance assessment. In the case of Central
> Java we were very fortunately to be allowed to use the social science team
> + Cecil Cook to establish how people used the stoves before selecting a
> test sequence for performance evaluation. The question of whether the
> assessment by users should come before the lab performance tests or
> afterwards was debated continuously. It is a worthy conversation.
>
> During the social assessment period, we were able to refine and
> standardise the CSI test method which has a whole section devoted to the
> creation of contextual test sequences so the lab test makes a reasonable
> assessment of field performance.
>
> While this had already been done in Ulaanbaatar in a combination of Robert
> van der Plas, Cecil and me, it was not as formalised and the technical
> aspects of the HTP method had evolved since then. I believe the package is
> now a worthy candidate for being an ISO Contextual Test Method having been
> demonstrated in the field multiple times.
>
> Regards
> Crispin
>
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