Estimate of transient and persistent energy efficiency in Africa: A stochastic frontier approach

Abstract

This article identifies the sources and determines the convergence and causes of energy efficiency in Africa. In terms of contribution, it provides the first cross-country evidence. This study applies the stochastic fixed effect, true fixed effect and the Kumbhakar-Heshmati (K-H) models using a panel data of 22 countries for the period 1988–2014. The result reveals that: (1) the problem of energy efficiency in Africa is more structural in nature. Removing transient inefficiency and minimizing persistent inefficiency will save 5.7% and 84% of total energy consumption, respectively. Thus, energy security and carbon emissions will benefit more from policies aimed at the long-term than the short-term; (2) overall energy efficiency is low and hyoid in nature. While it declined from 1988 to 2006, the trend has reversed after 2006; (3) economic growth, urbanization and population density promote efficiency but price, foreign direct inflows and service and industry output reduce it; (4) energy efficiency convergence is conditional in nature, driven by country-specific factors such as the level of technology; (5) energy intensity is not a good measure of energy efficiency and should not be used as a policy indicator for energy efficiency enhancement.