Effect of Fossil Fuel Subsidies on Renewable Energy Transition in Sub-Saharan African Countries

Souleymane Diallo, Youmanli Ouoba and Charly Gatete
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Youmanli Ouoba: Thomas Sankara University
Charly Gatete: ECOWAS Regional Electricity Regulatory Authority

A chapter in Energy Regulation in Africa, 2024, pp 429-452 from Springer

Abstract: Abstract Poor access to energy in sub-Saharan African countries, combined with high, rising and highly volatile international energy prices, has prompted most countries to introduce energy subsidies in order to protect the poor and make energy accessible. However, these subsidies are geared toward fossil fuels, to the detriment of renewable energies, which could be a factor holding back the energy transition process in this region. The aim of this chapter is therefore to analyze the effect of fossil fuel subsidies on renewable energy transition for 35 sub-Saharan African countries over the period 2010 to 2020. The results of the non-additive fixed-effects quantile regression show that fossil fuel subsidies slow down renewable energy transition. However, the magnitude of the negative effect of fossil fuel subsidies is greater in countries with a low level of transition than in countries with a high level of transition. The results of the estimation using the GMM method also show the existence of asymmetrical effects of fossil fuel subsidies on the energy transition. Indeed, an increase in subsidies reduces the energy transition, while a decrease in subsidies accelerates the energy transition in the short and long term. In terms of economic policy implications, these results suggest the need to reform energy subsidies in order to give greater importance to renewable energies and accelerate the energy transition. A gradual reallocation of subsidies towards renewable energies is therefore conceivable if the energy transition is to succeed and sustainable development is to be promoted in the countries of sub-Saharan Africa.

Keywords: Fossil fuel subsidies; Renewable energy transition; Quantile regression; GMM; Sub-Saharan Africa (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:aaechp:978-3-031-52677-0_19

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DOI: 10.1007/978-3-031-52677-0_19

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