Towards a cleaner energy system: Estimating the odds of transitioning to an energy-efficient state

Abstract

At the heart of the global transition to cleaner energy systems is also an inherent mandate of ensuring a transition to an energy-efficient economy. This study applies a two-regime Markov switching dynamic model to examine the possibility of transitioning to an energy-efficient state, using Ghana as the subject of analysis. Since changes in energy intensity do not necessarily suggest improvements in energy efficiency, the study controls for the effect of income, trade, and energy price. The results show that Ghana has a higher chance of transitioning to an energy-efficient state but a relatively lower possibility for such efficiency to persist. What's more, it would take 1.2 y for the said efficiency to persist. The study recommends a broad policy overhaul targeting institutional restructuring, energy financing, and regulatory efficiency as means to facilitate the prospects of transitioning and improving energy efficiency persistence.