Climate change and electricity consumption in Sub‐Saharan Africa: assessing the dynamic responses to climate variability

• Author: Justice Tei Mensah,Amin Karimu
• Date: 01 September 2015
• Published date: 01 September 2015
• DOI: http://doi.org/10.1111/opec.12054

Climate change and electricity consumption

in Sub-Saharan Africa: assessing the

dynamic responses to climate variability

Amin Karimu* and Justice Tei Mensah**

*Researcher, School of Business and Economics, Department of Economics/Centre for Environmental and

Resource Economics (CERE), Umeå University, Umeå, Sweden. Email: amin.karimu@econ.umu.se

**PhD student, Department of Economics, Swedish University of Agricultural Sciences, Uppsala, Sweden.

Email: justice.tei.mensah@slu.se; myjumens@gmail.com

Abstract

Electricity consumption in Sub-Saharan Africa has surged over the past twodecades, whereas eco-

nomic fundamentals like growth in gross domestic product (GDP) might have contributed to this

trend, the impact of changing climatic conditions cannot be underestimated. This study therefore

investigates the dynamics among electricity consumption, temperature variability (a proxy for

climate change) and economic growth, while controlling for urbanization within a structural vector

error correction model for 11 countries in Sub-Saharan Africa. Findings from the study indicate that

a positive shock in temperature variability has a positive permanent effect on electricity consump-

tion for all the countries except Togo, South Africa and Zimbabwe.In the case of Togo we find only

transitory effects of positive shocks in temperature variabilityon electricity consumption. However,

these effects are minimal, given the lowpenetration rate for air conditioners and heating devices in

these countries. Moreoverthe findings further indicate that the effects of a positive shock in tempera-

ture variability on real GDP is consistent in terms of the direction of the effects, which is negative,

but only vary across the sampled countries in relation to the period(s) the effects of the shocks com-

pletely diminished.

1. Introduction

Energy has evolvedover time to become a key component of human civilization as it plays

a fundamental role in shaping life and survival. The importance of energy in the modern

economy is enormous, driving all sectors of the economy—industry, service,

agriculture—as well as enhancing standard of living. The role of energy is further

reinforced by its potential to transform the economy structure of countries around the

world. As the World Bank (1996) argues, ‘no country in the world has succeeded in

shaking loose from subsistence economy without access to the services that modern

energy provides’.Thus, access to efficient supply of modern energy (i.e. electricity, fossil

fuels etc.) remains a key catalyst for growth and sustenance of everyeconomy.

322

© 2015 Organization of the Petroleum Exporting Countries. Published by John Wiley & Sons Ltd, 9600 Garsington

Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

As a result, the question on the causal link between energy and economic growth has

received extensive attention in the energy and growth literature, with emphasis on deter-

mining the long-run relation between the two to aid the design of appropriate environmen-

tal policies targeting CO2reduction. Further, whether the issue of decoupling economic

growth from energy demand is an important issue to consider in environmental policy

designs (see: Akarca and Long, 1980; Sari and Soytas, 2007; Chontanawat et al., 2008;

Wolde-Rufael, 2009; Shahiduzzaman and Alam, 2012). However,an impor tant issue that

has not received enough attention in the literature relate to the impact of climate change on

energy consumption, especially electricity. Changing climatic conditions has varied

implications on energy demand. Whereas rising temperature has the effect of driving up

energy demand for cooling purposes, the reverse is also associated with surging demand

for energy for heating purposes.

The issue is even more important if one considers Sub-Saharan Africa (SSA), where

climate change is not only affecting energy generation and consumption, but also on eco-

nomic growth (via agriculture) and the indirect effect of this on the interaction between

energy and economic growth on one hand, and energy security on the other. Also, the

impact of this on water resources cannot be overlooked, as there is increasing need for

energy generation to cope with the surging electricity demand, with hydropower genera-

tion as one of the major possible option for SSA besides solar energy.More so, rising tem-

perature levels in the regionimplies increased demand for electricity for cooling pur poses.

This paper seeks to contribute to the literature, by considering how electricity consump-

tion reacts to climatic shocks on one hand, and the reaction of economic growth to shocks

in climate variables in the other hand for SSA using a structural vector autoregressive

(SVAR) approach.

In other words, this study seeks to offer insight into the following gapping questions:

How does electricity and economic fundamentals [real gross domestic product

(GDP)] in SSA respond to shocks (innovations) in temperature? Are the effects of tem-

perature shocks on electricity consumption and economic growth temporal or

persistent? How does electricity consumption respond to structural shocks in the

economy? Findings stemming from this study will offer valuable insights on the impact

of climate change on the energy sector, specifically on electricity consumption and eco-

nomic growth in SSA, and thus provide valuable information on how to design the

appropriate adaptation policies to mitigate the impact of climate change in the SSA

sub-region.

A review of the literature shows that previousstudies on the effects of climate change

on energy and growth tend to focus on the developed economies of Europe and North

America (especially Organization for Economic Cooperation and Development coun-

tries). However, very little can be said of Africa, Asia, the Caribbean and LatinAmerica,

which are rather the most vulnerable regions to climatic shocks because of the high

Responses to climate variability 323

OPEC Energy Review September 2015© 2015 Organization of the Petroleum Exporting Countries