Due to poverty, serious soil erosion and shortage of rural household energy in Loess Hilly Region, Gansu Province, China, excessive consumption of biofuel has become a critical factor underlying eco-environment degeneration. Data on rural household energy use was obtained by questionnaires, and based on substitutable analysis, environmental and economic costs under different energy consumption structures were estimated using a quantitative model. The results show that annual energy consumption per household is 2112.44 kgce and per capita 428.59 kgce, a low level. The total annual energy consumption cost per household is 1925.25 yuan, of which environmental cost is 621.13 yuan and economic cost 1304.52 yuan. Commercial energy has been used widely. The per household annual cash payment for commercial energy is 536.51 yuan, 8.69% of household net income. Exclusive use of solar energy and biogas obviously decreases energy consumption cost, cash payout and energy source availability being the main criteria for household energy choice. To compare with the actual structure of energy usage, there are clear differences in the total cost, environment cost, economic cost and cash payout for households among the four substitutable structures. All costs are lower when biogas and solar energy are used, so this structure is the primary direction that rural energy should adopt in the future. (c) 2008 Elsevier Ltd. All rights reserved.