Impact of off-farm income on household energy expenditures in China: Implications for rural energy transition

Highlights: • We examine the impact of off-farm income on rural household energy expenditures. • We use household-level survey data from China and instrumental variable approaches. • Off-farm income significantly increases both electricity and gas expenditures. • Off-farm income significantly decreases coal expenditure. • We conclude that off-farm income promotes rural energy transition. -- Abstract: This study examines the impact of off-farm income on rural household energy expenditures, paying special attention to clean energies such as electricity and gas and non-clean energy such as coal. We use instrumental variable approaches to address the endogeneity issues of off-farm income and analyze household survey data collected from rural Gansu, Henan and Shandong provinces of China. Econometric results show that off-farm income promotes rural energy transition. In particular, off-farm income significantly increases both electricity and gas expenditures but decreases coal expenditure of rural households. Further analyses reveal that the energy transition effects generated by off-farm income are more pronounced for households in Shandong where the economy is relatively better developed relative to Henan and Gansu. Our findings highlight the importance of income diversification through off-farm activities by farm households to enhance clean energy accessibility and boost sustainable rural economic development.