Total factor energy efficiency and economic development in Africa
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ORIGINAL ARTICLE
Total factor energy efficiency and economic development in Africa Kwaku Ohene-Asare
&
Eric Nuertey Tetteh & Evelyn Lamisi Asuah
Received: 16 February 2019 / Accepted: 16 June 2020 # Springer Nature B.V. 2020
Abstract This paper presents an energy efficiency assessment of 46 African countries and analyzes possible bidirectional relationship between energy efficiency and economic development within a three-stage framework. In the first stage, energy efficiency is measured within a total factor framework using the slack-based measure with undesirable output and sub-regional comparisons are done. The second stage assesses the determinants of energy efficiency in Africa by way of a bootstrapped truncated regression. The third stage tests the reverse causal relationship between energy efficiency and economic development using 2-stage least squares. The results showed African countries to be on average, 56% energy efficient within the study period. Other African sub-regions could adopt the energy efficiency policies of North Africa as benchmark to improve energy efficiency. Economic development and technological progress are found to have significant positive effects on energy efficiency of African countries, while higher energy prices lead to higher inefficiency. Also, a bi-causal relationship is found to exist
K. Ohene-Asare (*) : E. L. Asuah Department of Operations and Management Information Systems, University of Ghana Business School, Legon, Ghana e-mail: [email protected]
E. L. Asuah e-mail: [email protected] E. N. Tetteh Principal Capital Microfinance Ltd., Accra, Ghana e-mail: [email protected]
between total factor energy efficiency and economic development, giving support to the concept of sustainable development and confirming the International Energy Agency’s assertion on the positive macroeconomic impacts of energy efficiency. African countries are therefore, encouraged to invest in energy efficiency technologies and policies to drive sustainable economic development. Keywords Energy efficiency . TFEE . Slack-based measure . Economic development . Africa . Undesirable output
Introduction The accessibility and utilization of energy are vital for almost all major economic activities, as such, energy is the driving force of life on earth (Mahmood and Kanwal 2017). Consequently, energy remains the major ingredient for economic development and prosperity (Chontanawat et al. 2008; Asafu-Adjaye 2000; Apergis and Payne 2009; Belloumi 2009; Costantini and Martini 2010; Mehrara 2007; Pao and Tsai 2011; Yuan et al. 2008; Lee and Chang 2007; Huang et al. 2008). Due to the indispensable nature of energy, global energy consumption in 2017 amounted to 14,050 million tonnes of oil equivalent (Mtoe), compared with 10,035 Mtoe in 2000 (International Energy Agency 2017). Meanwhile, Africa’s energy consumption increased by 2.9% in 2017, faster than the world’s average of 2.2% (BP 2017). It has been predicted that Africa may become a worldwide motor of growth in the future (Koskimäki
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