This study aims to assess the interactive nature and the individual components of fossil fuel subsidies and renewable energy investment on energy burden across 20 Sub-Saharan African countries. Also, the study assessed the long- and short-run effects of the interactive nature and individual components of fossil fuel subsidies and renewable energy investment on the energy burden from 2010 to 2022.
The dynamic panel two-step system, generalized method of moments, is used for this study.
The interactive effect, that is, the joint effect of fossil fuel subsidies and renewable energy investment, had a negative and significant relationship with energy burden. This suggests that the simultaneous increase in fossil fuel subsidies and renewable energy investment reduces energy burden in Africa. Also, the long-run effects of the combined remained negative, suggesting their combined effects decrease energy burden over time. Moreover, with the individual components, fossil fuel subsidies had a negative but insignificant relationship with energy burden, while renewable energy investment exhibited a negative and significant relationship with energy burden both in the long run and short run.
This study failed to control for other macroeconomic and institutional factors, such as fiscal policy pressures, institutional regulation and energy price shocks.
The study addresses a key gap in existing literature, which largely treats fossil fuel subsidies and renewable energy investments as independent policy instruments. This study focuses on the “two-way policy” by analyzing the interactive or joint effect of fossil fuel subsidies and renewable energy investments on energy burden in Sub-Saharan Africa. Also, the study analyses the long-run and short-run interactive or joint effect of fossil fuel subsidies and renewable energy investments on energy burden.
