Changes in Energy Intensity During the development Process：Evidence in Sub-Saharan Africa and Policy Implications

Abstract

Particularly for developing regions like Sub Saharan Africa, energy intensity is a critical policy issue and usually affected by four challenges: substitution between energy and other factors, technological change, changes in energy composition, and changes of economic growth. This paper examines energy intensity, output elasticity, energy-capital-labor substitution possibility, and factors contribution rates. The study applies a Translog production approach with data spanning 1990–2014 and further, applies ridge regression technique as a robust rectification to achieve unbiasedness in the findings. There is expected evidence of inverse relationship: higher energy intensity in lower per capita economy, evidenced by upward energy tariffs with lower energy elasticity. Factors are inelastic and have average elasticity substitution possibility for capital-energy with their inferential rebound effects’ challenges. However, other combinations indicate complementarity at the current development stage. We further, observe that if higher energy intensity not managed, would translate into higher CO2 intensity, because 99% of total energy is sourced from hydrocarbons of 51% and 48% of biomass. Based on the findings, policymakers and implementors are encouraged to integrate and optimize the whole energy system towards improving energy efficiency through increasing renewable energy composition from the current 1% to at least 10% whiles increasing quality-energy from nonrenewable.