Energy Consumption,Inter-factor And Inter-fuel Substitution And Economic Growth In Africa

Energy has become the bedrock of every economy’s development hence,the uncertainty with regards to its availability for consumption and affordability,its development and the effect of its consumption on the environment should be given the needed attention.Given the uncertainties surrounding energy use,any decision towards investment into energy development projects requires the needed planning which this dissertation sorts to present on Africa to help bridge the research gap and innovation in policies towards planning on the topic.The main purpose of this dissertation is first,access energy substitution possibility in some selected countries in African namely Ghana,Nigeria,South Africa and Egypt by applying the translog production method to a time series data of petroleum,electricity coal consumption as energy inputs and capital and labor as factor inputs and second applying the same variable to a panel data on all African countries.First,the modeling sort to extract output elasticities and estimate the possibility of substituting one input for another and the feasibility of substituting an input for the other will largely depend on the technological advancement of the input hence the need to estimate the technological progress of various inputs employed.Second,policies of increasing the use of renewable energy will be discussed to enhance the expansion of renewable energy investment and consumption.The dissertation documents some findings which includes for various countries selected and all African countries.In the first place,our results on Ghana show that,all inputs are substitutes with their relative technological progress also showing evidence of convergence.This suggests that,redirecting resources into the improvement of technology towards cleaner energy production like electricity will be a success over time and this will mean the fueling of the economy will be done in a cleaner environment and mitigating C02 emissions as well.The improvement of electricity production and the promotion of its use require government policies that will enable industries to adjust to the switch from one input to the other through capital subsidies and tax rebates.Also,energy-labor and capital-energy being substitutes in our findings suggest that,removal of all energy subsidies will reduce the use of energy and increase capital and labor intensiveness Second,the same findings for all inputs being substitutes were documented on Nigeria however,petroleum was found not to be among the main drivers of the Nigerian economy.This implies that adopting competitive pricing policies and removal of petroleum subsidies and price ceilings would redirect industries towards an increased use of electricity and increase capital and labor intensiveness.Furthermore,the study points to evidence for convergence in relative technical progress among the various input pairs with electricity registering the fastest rate.These imply that petroleum would gradually lose its dominance in Nigerian energy mix.Third,result on South result documents that electricity and coal are the major drivers of South African output and also have a faster technological progress over petroleum.Also energy inputs were found to be substitutes;therefore removing all price ceilings and subsidies on petroleum will decrease the demand for petroleum in effect protecting South African economy from external petroleum price shocks while reducing C02 emissions.This will also increase the demand for electricity from renewable sources;however the success of this substitution will depend on policies geared towards large scale electricity production to meet demand.The also points to evidence that coal will continue to dominate as the main energy source of South Africa.Therefore,adopting various clean coal technologies will help accelerate the C02 mitigation effort to enable South Africa meet its C02 reduction target.Fourth,the results on follows the result of the other countries with all inputs being substitutes which implies that adopting competitive electricity pricing policies and removal of petroleum subsidies and price ceilings will re-direct industrial energy use to electricity as well as increasing efficient capital and labor intensiveness which imply the ability to fuel the Egyptian economy as well as mitigate C02 emissions however,the success of this will depend on government policies towards strengthening labor laws and cost intervention policies to help industries adjust to the switch.Notwithstanding,this study evidenced convergence of all input pairs with electricity having the fastest relative technological progress while labor and petroleum faster than capital which indicate the success of policies which aim at increasing renewable electricity production and strengthening labor and merger policies.Aggregate substitution benefit of the four countries indicates that,C02 emissions could be reduced without hampering economic growth.All the four countries registered a high amount of C02 emission reduction through increasing capital investment by 5 and 10%towards petroleum and coal reduction and also evidenced a neutral effect on output of the economy.Finally,results on Africa indicate that,even though aggregate electricity and labor were found to be the major drivers of the economy,output elasticity estimates points to evidenced,petroleum and electricity to have dominance for contributing to output over capital and labor to a lesser extent.The result also evidenced all inputs employed to be substitutes with a positive but low technical change.Substitution between petroleum and electricity ranging between 1-1.39 is a clear indication that policies geared towards energy transition to electricity use will be feasible in the long run.This will mean the fueling of the economy will be done in a cleaner environment as well as saving the economy from huge petroleum import bills and subsidies.The range of substitution between capital and petroleum also points to evidence petroleum losing its dominance to capital through an increase in capital intensive policies towards petroleum reduction.