Abstract Compared to firewood, charcoal is a relatively clean and convenient fuel. Nevertheless, the mass production of charcoal can contribute substantially to deforestation, rendering it imperative to regulate charcoal use. This article uses nationally representative panel data on Tanzania conducted in 2008 and 2010 to examine how charcoal expenditures change over time within any given household. The focus of the analysis will be on identifying certain socio-economic factors that affect charcoal use at the household level. The framing of the analysis on variation in time within each household addresses the omitted variable bias that often undermines inference from comparisons across different households. We find that while charcoal expenditures increase with household income, the rise in charcoal use with income is relatively gradual. Household size is unrelated to charcoal expenditures, but urban–rural differences in fuel choice are large even though we include household fixed effects in all specifications. In this regard, policymakers and urban planners need to pay particular attention to the role of urbanization in predicting trends in charcoal expenditures in developing countries like Tanzania.