Policy Options: Subsidies

Designing Effective Subsidies, A case study of

Nepal's Biogas Support Program (BSP)

THE NETHERLANDS DEVELOPMENT Organization, has been awarded Climate Technology award for making outstanding contributions in the protection of environment. About 60,000 biogas plants have been built and are in operation in Nepal.

According to Biogas Support Program, a joint venture between Nepal government, SNV and GTZ, nearly 50 companies aim at installing 100,000 biogas plants within the next six years. The biogas plants installed so far have saved 142,500 tons of fuelwood and 25,000 tons of dried cow dung a year.

Nepalnews.com, February 2000

Nepal's Biogas Support Program (BSP) supports a subsidy that varies in size according to the remoteness of the region and size of the plant. "The subsidy has been very effective at jump-starting the industry and leveraging high quality installations and competition between many suppliers. This resulted in the real price of biogas dropping 20% between 1993 and 1998."

BSP is praised for its cost-effective program design; US$103 for flat areas, $147 for hilly districts and $176 for the remote hills (CRS). The financial incentives, technical support provided to manufacturers and heightened public demand helped increase the number of recognized biogas companies from 1 in 1992 to about 46 today. Since the policy's inception in 1992, these companies have built more than 103,922 plants.

The success of BSP can be attributed to: the monitoring, evaluation and quality control mechanism of the plants, "active training of biogas technicians and skilled labor " (UNESCAP), proper channeling of the subsidy and loan money, and the manufacturers' use of a single quotation to make the cost of a plant stable.

This program effectively enhanced the production and use of a renewable resource. Biogas substituted energy resources (i.e. firewood, dung, kerosene) that emitted considerable carbon dioxide emissions and caused major health problems. Replacing firewood use with biogas also positively influenced social inequities by reducing the time and hard labor women spend collecting firewood for cooking and cleaning.

The BSP was implemented in 1992 by a joint effort between the Nepalese government, Netherlands Development Organization and Dutch Development Corporation, Agricultural Development Bank of Nepal and the Gobar Gas Company (in Nepal).

Resources:

Center for Resource Solutions
United Nations' analysis of BSP's success
Nepal's Biogas Program: Reason for Success in Nepal