This study aims to examine the financial sovereignty risks faced by governments and the private sector in balancing fossil fuel subsidies with renewable energy investments. Specifically, it investigates how government financial sovereignty risks influence both fossil fuel subsidies and renewable energy investments and evaluates the effects of its individual components. In addition, this study analyzes the impact of private sector financial sovereignty risks on fossil fuel subsidies and renewable energy investments across 31 Sub Saharan African countries over 14 years.
This study adopted the two-step system, Generalized Methods of Moments, to assess the effects of government and private-sector financial sovereignty risks on fossil fuel subsidies and renewable energy investment.
Government financial sovereignty risk increases fossil fuel subsidies but reduces renewable energy investment, while private financial sovereignty risk reduces fossil fuel subsidies but has no significant effect on renewable energy investment. Foreign direct investment supports renewable energy investment, highlighting the role of targeted external financing.
This study examines two composite indices: the government and private sector financial sovereignty risks by including most of the financial sovereignty factors or variables. This provides a new way of understanding how financial sovereignty shapes energy investments in Sub-Saharan Africa.
