Energy Supply and Climate Change in Nigeria

Abstract

The energy industry has been identified as one of the sectors most vulnerable to the impact of climate change. In the past years, government had been making a lot of effort at reforming the energy sector and this study attempted to investigate the extent to which the energy sector will be affected in the face of the threats presented by a changing climate. The study seeks to examine the impact of climate change on energy supply in Nigeria for the period 1971-2011 using the vector error correction procedure. We adopted the Johansen and Juselius, and Engle-Granger co-integration analysis to determine the rank of the series long run co-integration. Also the error correction model was used to obtain the long-run estimates and the speed of error adjustment. We corroborate our findings by adopting the Wald exogeneity test to examine the direction of causal relationship between climate change and energy production. The study found a positive relationship between climate change and energy supply, as well as no evidence of causal relationship between climate change and energy supply. The study developed an interaction of climate change and measure of institutional quality, though less responsive to energy supply, but exhibits similar pattern with the actual climate change. Also, the indicators of power losses, technology and investment impacts a significant negative influence on energy supply, while GDP per capita and economy structure exerts though positive but the indicator of economic structure was statistically insignificant in explaining dynamism in energy supply. The findings from our empirical investigation puts caution on economic advisers and policy makers on the level of adherence to the Kyoto protocol in order not to jeopardize productivity activities and economic gains. Also,adaptation efforts should however follow careful scenario analysis with a strengthened institutional framework and injection of funds for technological improvement. This could be done in partnership with international organizations and the private sector.