The Candle is used to light up tunnels underground by the player. The candle may also be requested from inmates in favours. You could also give it to fellow inmates to raise their opinion of you. It does not appear to affect light in The Escapists 2, meaning its only use is as a favor item.
Obtaining
The Candle can be found in desks, inmate's inventory or by crafting.
Candle
Wire + 
Battery
Candle
Wax + 
Lighter + 
Piece of String