Technical fossil fuel energy efficiency (TFFEE) and debt-finance government expenditure nexus in Africa

Achieving the SDG7 goal, among other things, requires doubling efforts in energy efficiency improvements. However, in Africa, the progress has been slow, proving difficult for the continent to achieve the target set for 2030. The purpose of this study was to examine the effect of government expenditure (conditioned on external debt finance) on fossil fuel energy efficiency in 28 African countries, using data from 1988 to 2016. We employed the stochastic frontier method to estimate energy efficiency and Tobit regression to examine the relationship between energy efficiency and the conditional effect of government expenditure. The results showed that increasing government expenditure reduces TFFEE, but when conditioned on external debt finance, the effect is positive and partial in nature. This rather suggests an optimal mix of tax and debt finance instead of the total reliance on the latter to promote energy efficiency. While increasing debt finance for energy efficiency purposes can trigger a generational paradox in energy efficiency, responsible savings by current generation of energy efficiency gains and altruistic behaviour of the current generation could help deal with this generational paradox in energy efficiency.