Elasticity estimation of fuelwood demand in rural areas of the Caspian forest, northern Iran, based on Almost Ideal Demand System

Relatively little information concerning energy derived from biomass and potential influenced variables causes uncertainty in models for energy policy and environmental conservation. About half of the world's populations, who often live in developing countries, are depending on solid sources of energy such as biomass and coal. Given Iran’s rich reserves of fossil fuels, it is not expected using solid fuels such as firewood. However, due to the deficiency in distribution system, rural poverty and subsistence economy, wood burning is common more or less. The demand for wood as a source of household energy comes from everyday decisions which Influenced by the household budget, relative time spending, prices of other energy sources, as well as social and cultural factors. The aim of this paper is to estimate the demand of hardwood as fuel in rural area of Caspian forest, northern Iran. Almost Ideal Demand System (AIDS) model and data from household budget survey (1991-2010) has been used to estimate the demand of firewood. Prices of fuelwood, kerosene, gasoline, and natural gas have been derived and separately considered in the model. The results showd that price elasticity of demand is negative in all commodities. Kerosene and gasoline are substitute and gas is complementary goods for fuelwood. Also price index of food, house, and gasoline were elastic, their price elasticity were -1.22, -1.03, and -1.36, respectively. According to the results, firewood own price elasticity was -0.29 and Income elasticity was 1.34.