The Hidden Barrier Blocking the Shift to Clean Cooking Fuels

Expanding clean cooking access requires more than infrastructure and financial support. It also depends on whether households can compare costs, assess risks, access loans and value the benefits of making the switch. Research from China suggests that financial literacy may be an overlooked factor shaping how rural households move away from traditional cooking fuels.

The study, titled "The Impact of Financial Literacy on Clean Cooking Fuel Choice Among Rural Households: Evidence from China," was authored by Zuanjiu Zhou of the Chengdu Academy of Social Sciences and Shilong Xia of Sichuan University and published in the journal Energies. Using household data from rural China, the researchers examine whether financial knowledge is associated with the adoption of cleaner cooking options and investigate the economic and social pathways behind that relationship.

China provides an important example, but the underlying question extends far beyond one country. Across Asia, Africa and Latin America, households often face a combination of limited incomes, unreliable energy supply, high upfront costs and inadequate financial services. Cleaner cooking technologies may be available, but adoption can remain slow when families cannot absorb the initial expense or are uncertain about future savings.

The Clean Cooking Transition Is Also a Financial Decision

Clean cooking fuels include electricity, natural gas, liquefied petroleum gas, biogas and other modern energy sources. Traditional fuels such as firewood, straw and coal remain common in many low-income and rural communities, exposing households to indoor air pollution and imposing costs in the form of health risks, time burdens and environmental damage.

The global scale of the challenge remains substantial. The study notes that around 2.1 billion people lacked access to clean cooking fuels and technologies in 2022. Progress has been uneven, with rural and lower-income households often facing the greatest barriers to adoption.

The financial structure of the transition can explain part of this gap. Cleaner cooking may require a new stove, connection fee, electrical upgrade, gas equipment, regular fuel payments or changes in household routines. Some options may reduce costs over time, but the benefits are not always immediate. Families living close to the poverty line may prioritise food, healthcare, education and housing before investing in equipment that produces returns gradually.

Financial literacy can influence how households navigate these trade-offs. People who understand interest rates, inflation, repayment obligations and risk may be better positioned to compare different energy options and identify financing arrangements. They may also have greater confidence in dealing with banks, suppliers and unfamiliar service providers.

The Chinese evidence does not suggest that financial literacy replaces income support or infrastructure. It indicates that cognitive and financial capabilities can affect whether households are able to convert access into actual adoption.

China Offers a Wider Lesson for Developing Economies

The Chinese study analysed 3,960 rural household observations from 29 provinces using the 2018 China Family Panel Studies. The researchers measured financial literacy through questions related to compound interest, inflation and risk diversification, while clean-energy adoption was based on the household's primary cooking fuel.

The results indicate a significant positive association between financial literacy and clean cooking fuel use. In the benchmark analysis, a one-unit increase in the financial-literacy measure was associated with a 6.1-percentage-point increase in the probability of using clean energy. After household and demographic controls were included, the association remained positive at 3.4 percentage points.

China's experience is especially relevant because it combines rapid economic transformation with large regional and rural disparities. The share of rural households using clean cooking fuels rose from 54.6% in 2016 to 77.4% in 2023, according to figures cited in the paper. Yet the remaining gap is concentrated among households facing weaker infrastructure, lower incomes and more limited opportunities.

Other developing economies face comparable constraints, even when their energy systems differ. A rural household in India, Ghana, Nepal or Kenya may confront high connection costs, irregular supply, limited access to formal credit or a lack of reliable information about clean-energy products. The precise fuel mix will vary, but the decision-making challenge is similar.

Policy-makers should therefore view financial literacy as part of an enabling environment for energy access. A subsidy may lower the price of a clean stove, but households still need to understand the terms, maintain the equipment and plan for recurring expenses. Consumer finance can expand access, but it can also create risks if families borrow without adequate information or protection.

Credit, Jobs and Trust Shape Energy Choices

The study identifies three possible channels through which financial literacy may influence clean cooking adoption:

• Credit access: Households with stronger financial knowledge may be better able to understand loan conditions, assess repayment capacity and approach formal financial institutions. The analysis suggests that financial literacy is associated with fewer borrowing constraints, allowing families to manage the upfront cost of clean-energy equipment.
• Livelihood diversification: Financial literacy is positively associated with non-agricultural employment and entrepreneurship. Income from business activity, wage work or migration can increase a household's ability to pay for modern fuels and may also expose families to different consumption patterns.
• Social trust: The study finds a positive association between financial literacy and trust in strangers. The authors suggest that trust can reduce the uncertainty involved in dealing with unfamiliar suppliers, lenders and energy providers. Households may be more willing to adopt new technologies when they believe contracts will be honoured and services will be delivered reliably.

These pathways point to a broader relationship between energy transition and rural development. Clean cooking adoption is not simply a matter of replacing one fuel with another. It can be connected to employment, credit, entrepreneurship, consumer confidence and social institutions.

The effects are not uniform across households. The research finds that financial literacy has a stronger association with clean-energy adoption among households where the head has less than senior-high-school education. The authors suggest that financial literacy may partly compensate for weaker formal education by improving information processing and risk assessment, although they present this as a possible explanation rather than a definitive conclusion.

The positive effect also weakens as the number of children under 16 in a household increases. Larger families face greater daily expenses and care responsibilities, leaving less money and time for energy investments. Financial knowledge may help households make better decisions, but it cannot remove the pressure created by limited disposable income.

Energy Policy Must Combine Capability With Affordability

Clean cooking programmes should combine supply-side measures with household capability-building. Expanding distribution networks, improving electricity reliability and reducing equipment prices remain essential. Financial education can strengthen these interventions by helping households evaluate options and use available support.

Rural financial-literacy programmes should be practical and locally relevant. Training could explain household energy costs, loan conditions, payment schedules, maintenance expenses and the long-term benefits of cleaner fuels. Delivery through schools, cooperatives, women's groups, agricultural extension services and local administrations could help reach households that are poorly served by formal banking institutions.

Credit policies also require careful design. Affordable loans, pay-as-you-go models and targeted green-finance products could reduce upfront barriers. Consumer protection must accompany these products to prevent hidden charges, unsuitable borrowing and over-indebtedness.

Development agencies can support integrated programmes linking clean cooking with livelihood development. Vocational training, entrepreneurship support and rural employment initiatives may increase the income needed to sustain cleaner energy use. Programmes should also consider households with children, older people and other dependants, for whom energy investments may be harder to prioritise.

Businesses have an opportunity to develop affordable appliances, reliable distribution systems and after-sales services suited to rural conditions. Trust will be critical to market development. Households are unlikely to continue using clean technologies if equipment fails, fuel supply is unreliable or service providers are difficult to contact.

It should be noted that the study's data come from a single survey wave in China, which limits the ability to establish whether financial literacy directly caused changes in cooking-fuel choices. The instrumental-variable strategy addresses some concerns about endogeneity but depends on assumptions that may not be fully satisfied. The mechanism analysis is also associative rather than experimental.

Future research should use panel data, field experiments and quasi-experimental programmes to determine whether financial education or improved rural credit directly increases clean cooking adoption. Comparative research across countries could reveal how the relationship changes with income levels, energy prices, gender roles, digital access and infrastructure quality.

China's experience suggests that it is also a question of household agency: whether families have the knowledge, income, credit and confidence to make a transition and sustain it. Policies that combine modern energy infrastructure with financial capability and livelihood support will be better placed to turn nominal access into lasting use.