Impact of natural gas consumption on sub-Saharan Africa's CO2 emissions: Evidence and policy perspective

Abstract

With huge natural gas(NG) reserves and current low (1%) share of non-hydro renewables in Sub-Saharan Africa (SSA), can natural gas offer SSA a low-carbon energy transition? Employing data from 1980 to 2017, this paper investigates the impact of NG consumption on SSA's CO2 emissions using data-driven nonparametric additive regression(NPAR) which can reveal both linear and nonlinear effects. Augmenting NPAR with translog production function(TPF) estimates of interfuel substitution elasticities and bias technological progress over sample period(advantage of TPF), we further provide evidence of the indirect effect of NG consumption on SSA's CO2 emissions through mechanism analysis. From the empirical results, the linear effect shows NG positively impact CO2 emissions while the nonlinear effect indicates a downward decreasing trend (meaning expansion in NG consumption will gradually lower CO2 emissions). Nonlinearly, urbanization and energy efficiency also show positive “inverted U-Shaped” and “downward slopping” respectively meaning sustainable urban energy and energy efficiency practices improvement can lead to CO2 reduction respectively in SSA. The reducing effect of NG consumption on CO2 (the nonlinear effect) is realized through the enhancement of positive bias technological progress of NG over coal and oil but not merely substitution of coal and oil for NG. Technological progress improvement in NG use will also reduce the positive linear effect of urbanization and energy efficiency on CO2 emissions of SSA. Oil is more likely to be substituted for NG than that of coal in SSA. The scenario analysis shows a total of 6.9%, 7.6% and 8.3% of energy conservation is realized in 2022, 2026 and 2030 with a corresponding CO2 reduction of 18.7%, 20.7% and 22.9% respectively for a continuous 10% investment in NG. Institutional, market-oriented and technology challenges hinder NG development among major producers in SSA. Based on the results, several policy measures are put forward to promote SSA's low-carbon energy transition.