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Article
The role of corruption control and regulatory
quality in energy efficiency transition tendencies in
Africa

Charity Dzifa
Akorli, Philip Kofi
Adom
padom@gimpa.edu.gh

Highlights
African countries are
locked in a low energy-
efficient state

Transition tendency
considered moderate and
possible in the long term

Lower corruption and

improved regulatory
quality improve transition
tendencies

Better institutions needed

to achieve UN SDG target
7.3 in Africa

Akorli & Adom, iScience 26,

106262
March 17, 2023 ª 2023 The
Author(s).
https://doi.org/10.1016/
j.isci.2023.106262
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Article
The role of corruption control
and regulatory quality in energy
efficiency transition tendencies in Africa
Charity Dzifa Akorli1 and Philip Kofi Adom2,3,4,5,*

SUMMARY
This study answers an important policy question related to energy efficiency tran-
sition tendencies and the role that control of corruption and regulatory quality
can play, using the Stochastic Frontier and Panel Markov-Switching techniques
with panel data from 46 African countries. We have demonstrated in this study
that African countries have been locked in a low energy-efficient state, with ten-
dencies to transition out considered low to moderate with a 21-24% chance and
more likely in the long term (i.e., after a decade). This raises serious concerns
about the robust nature of current energy efficiency policies implemented and
the kind of investment in technology undertaken in Africa. The results further
illustrate that improving regulatory quality and controlling corruption can in-
crease African countries’ likelihood to leapfrog out of the low energy-efficient
state. Thus, the findings underscore the importance of developing better and
proper institutions to achieve the UN SDG target 7.3.

INTRODUCTION
The COVID-19 pandemic plunged many economies in the world into serious economic stress including
those in Africa. According to a World Bank report, global economic activity contracted by 2.1% in 2020.1
On a per capita basis, the contraction of economic activity was estimated to be nearly 5%. In Eastern
and Southern Africa, economic activities contracted by 3% in 2020; for Central and Western Africa, the
contraction in economic activities was estimated at 1.1% in 2020.1 The post-COVID recovery programs
are expected to re-engineer growth and put economies on a sustainable path. African countries are pro-
jected to grow at an annual average growth rate of 4.2% by 2025.2 Among other things, achieving a sustain- 1Department of Economics
able growth path post-COVID era requires that countries optimize the use of the limited energy resources and Hospitality, School of
at their disposal. Particularly, in Africa, where majority of the people lack access to energy,3 indiscriminate Liberal Arts and Social
Sciences, Ghana Institute of
use of energy resources not connected to productivity could harm the quest to achieve sustainable growth Management and Public
and development in the future. Fuso Nerini et al.4 noted that energy is connected to almost all the Sustain- Administration (GIMPA),
Accra, Ghana
able Development Goals (SDGs). Specifically, they opine that decisions on SDG 7, which includes
2Department of
improving energy efficiency efforts (i.e., SDG target 7.3), give the ability to improve individual welfare,
Development Policy, School
achieve environmental sustainability, and help build physical and social infrastructure.4 of Public Service and
Governance, Ghana Institute
of Management and Public
Achieving energy consumption efficiency means optimizing the usage of energy resources to realize Administration (GIMPA),
greater productivity. This makes energy efficiency improvement a cost-saving strategy as its realization Accra, Ghana
means using either the same/less energy input to achieve greater output. There are innumerable benefits 3School of Economics and
associated with such a cost-saving strategy. First, achieving and sustaining energy efficiency reduces the Finance, The University of
Witwatersrand,
requirement to expand energy infrastructure, thereby cutting down on the energy infrastructure invest- Johannesburg, South Africa
ment cost for the nation.5,6 These extra savings resulting from energy efficiency improvement can be 4GIMPA – PURC Centre of
directed to other developmental projects such as expanding other social infrastructures and building Excellence in Public Utility
the entrepreneurial capacity of the youth. As mentioned by Agradi et al.,7 improving energy efficiency Regulation (CEPUR), Accra,
Ghana
can enhance the employability of the youth in a country. Second, energy related emissions are the leading
5Lead contact
cause of atmospheric greenhouse gas emissions. Therefore, achieving energy efficiency improvements can
*Correspondence:
significantly help curtail energy-related emissions and hence improve environmental sustainability.8 En- padom@gimpa.edu.gh
ergy efficiency improvement is also closely connected to energy security. Countries that are able to achieve
https://doi.org/10.1016/j.isci.
significant energy efficiency improvement can cut down their energy import bill. These import savings 2023.106262

iScience 26, 106262, March 17, 2023 ª 2023 The Author(s). 1

This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
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could also be directed toward providing other developmental projects. In sum, achieving energy efficiency
improvement can enhance total factor productivity and promote economic growth.9,10

The link between energy efficiency and development is most strengthened if the gains in energy efficiency
can be guaranteed in the long term. As noted in Adom et al.,11 the inability to realize a sustainable energy
efficiency transition could make the realization of SDG 7 and hence sustainable development difficult tar-
gets to achieve. Several reasons such as undeveloped markets for technology, lack of maintenance culture,
changing conventions and standards, inefficient pricing, and weak institutions among others can make the
attainment of energy efficiency unsustainable. Recent evidence suggests that achieving sustainable prog-
ress in energy efficiency improvements can be complex and difficult. Global energy efficiency improve-
ments slowdown before the COVID-19 pandemic and became serious during the pandemic. In 2011/
2016, global energy intensity improved (i.e., energy efficiency) by 2.3%. It slacked in 2017 and 2018 to about
1.8% and 1.1%, respectively. However, in 2019, it rose to 2% only to fall back again to less than 1% in 2020,
and was expected to rise to about 1.9% in 2021.12 In 2019, energy savings because of technical improve-
ments were reduced by 5% relative to the 2018 level.12 This raises the legitimate concern of whether coun-
tries are making sustainable progress in energy efficiency transition and what might be driving this process.
The underlying assumption here is that to achieve an energy efficiency level that is meaningful for sustain-
able development, consideration should be given to factors (i.e., economic, institutional, and behavioral)
that are healthy for energy efficiency transition. The aim of this study is to understand the nature of energy
efficiency transition tendencies in Africa and how institutional factors (i.e., corruption and regulatory qual-
ity) influence these tendencies.

There are several studies on ascertaining the levels of energy efficiency13–19 and how the levels of energy
efficiency connect to development outcomes7,20,21 and institutional factors.6,22–25 However, few studies
have considered the transition tendencies for energy efficiency. The issue of energy efficiency transitional
tendencies was first highlighted by Adom11 and Adom and Adams26 using the case of Cameroon and
Nigeria, respectively. Both studies emphasized the decrepit nature of energy efficiency transition ten-
dencies in those countries. However, both studies used the timescale definition of an energy-efficient state,
which does not make reference to the frontier (i.e., the normative benchmark energy use). The timescale
definition focuses on inter-temporal changes in energy intensity, where positive and negative growth rates
mark different energy-efficient states. However, changes in energy intensity may mask structural changes
and changes because of price, population, and temperature changes, which have nothing to do with tech-
nical changes.27 Zhang and Adom28 addressed this concern using the frontier-based definition of energy
efficiency derived from the Stochastic Frontier Analytic (SFA). The frontier-based approach identifies the
actual energy use state and the normative benchmark energy use, and then measures energy inefficiency
as the extent of deviation of the actual state from the benchmark state. Using provincial level data for China,
the authors combined the SFA with the Panel Markov-Switching Regression (PMSR) to investigate the tran-
sition tendencies for energy efficiency by Chinese provinces. The panel approach adopted by Zhang and
Adom28 in contrast to the time series approach adopted in the case of Adom11 and Adom and Adams26 is
considered superior in dealing with unobserved country-specific heterogeneity and omitted variable bias.
Even though Zhang and Adom28 made the transition probabilities endogenous, they did not provide
explicit evidence on what drives countries’ energy efficiency transition tendencies. For practical purposes,
understanding the conditions necessary to boost energy efficiency transition tendencies is necessary for
developing and designing energy efficiency policies and programs.

The current study expands the contribution of Zhang and Adom28 by examining how institutional condi-
tions like control of corruption and regulatory quality matter in the energy efficiency transition tendencies
in Africa, which is novel from the perspective of Africa. Adom11 and Adom and Adams26 emphasized that
poor institution is a key reason why Cameroon and Nigeria are caught up in a low energy-efficient state.
This corroborates the claims by Porter29 and Fredicksson et al.23 Porter29 is of the view that improving reg-
ulatory quality can promote investment in technology and hence optimize resource use whereas Fredriks-
son et al.23 assert that high corruption can lead to the compromise of environmental and energy regulation
and policies and thereby make it difficult to adhere strictly to energy policies. It is important to state that the
second-stage analysis (i.e., estimating transition tendencies) is likely to suffer from omitted variable bias,
which might confound the relationship. That said, it is also important to keep the model simple to induce
model convergence. Therefore, we do not make any strong attribution claim in this study. At best, we pro-
vide information on how institutional factors could be associated with energy efficiency transition

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tendencies. The current study provides evidence for multiple energy types (i.e., primary energy efficiency,
electricity consumption efficiency, and gasoline consumption efficiency). This is critical because the tech-
nological requirement differs. Lastly, this study provides the first cross-country panel evidence on energy
efficiency transitional tendencies. From a regional policy perspective, this is crucial as it relates to efforts to
build consensus on achieving regional energy targets.

The next section provides a theoretical discussion on the link between energy efficiency and institution.
This is followed by description of the method and data and presentation and discussion of the results.
The paper ends with concluding remarks with policy implications.

Energy efficiency and regulation nexus

The effect of regulation on energy efficiency is not clear-cut in the literature. Although some see regulation
as an extra burden,30 others are of the view that regulation can create an environment for new innova-
tion31,32 and investment in energy R&D, infrastructure and capacity.33 Regulation helps govern behavior
through a set of rules established to respond to market and technological conditions. Gann et al.32 assert
that regulation can be used as a portfolio of policies to stimulate performance. Porter29 notes that stricter
standards can force firms to innovate and thereby promote technological innovation such as energy-effi-
cient technologies. Standards according to Porter are key to the institutional setting necessary for creating
competitive advantage. Kirk and Besco34 and Bruns et al.35 argued that regulatory quality provides a solid
ground for improving energy efficiency. However, regulations regarding the control of energy policy must
not be static but dynamic to meet social and behavioral changes. Other related literature36–38 also confirms
regulatory quality as a critical channel for enhancing energy consumption efficiency in Africa.

However, because regulation normally fossilize practices based on either existing technology or tradition,
it might have the tendency to limit innovation behavior32 and thereby not promote energy efficiency tran-
sition. From the above, we hypothesize that regulation could or could not enhance energy efficiency. This is
because the development of other mechanisms might be critical for regulation to stimulate innovation.

Energy efficiency and corruption nexus

Corruption control is one of the mechanisms that can weaken the effectiveness of regulation in stimulating
innovation and hence energy efficiency. First, corruption may impact negatively environmental outcomes
by reducing the stringency of environmental and energy policies. As noted by Fredriksson et al.,23 higher
corruption reduces the stringency of energy policies in OECD countries. Second, corruption imposes a
higher cost on firms and individuals and this could affect the behavior of firms and individuals in different
ways. The higher cost imposed on firms as a result of corruption can make firms or individuals divert re-
sources away from productive processes and make them obliged to use technologies that are energy inef-
ficient.24 Thus, corruption makes the business environment not very receptive to innovative green invest-
ment initiatives. Moreover, individuals and firms may be more willing to pay the price of corruption as a
compensation strategy for the environmental costs imposed by their activities. Consequently, individuals
and firms would not be willing to invest in technological innovation, leading to continued inefficient pro-
duction processes with high associated carbon emission levels. As noted by Krammer,39 bribes are seen
as strategies to overcome bureaucratic inefficiencies in the public sector. Lastly, corruption causes misal-
location of resources, as local officials impose rent costs that automatically force firms and individuals to
pay bribes.6,25 This results in firms and individuals allocating resources to inefficient activities, with negative
impacts on technological innovation. Thus, control of corruption can help countries leapfrog from low en-
ergy-efficient states and converge to high energy-efficient states.

Pei et al.40 and Zhou et al.41 are of the view that limiting corruption is critical to improving energy efficiency.
This is because laws would be allowed to take their course without impediment. Adom and Adams26
discovered that corruption is a significant contributor to Nigeria’s persistent energy inefficiency. Similar
studies42–46 discovered that corruption has an indirect effect on economic growth via energy consumption;
the findings also suggest that the implementation of effective mechanisms to control the level of corruption
can lead to sustainable energy consumption. According to the evidence from Ozturk et al.,47 the lower the
rate of corruption, the higher the level of energy efficiency for all countries. Based on the above, we hypoth-
esize that controlling the level of corruption can enhance the energy efficiency transition tendencies of
countries.

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Figure 1. Diagrammatic illustration of measuring

technical energy efficiency

Method and data

The method section of this paper is in two parts. The first part provides a description of the technique used
to estimate technical energy efficiency. The second part then models energy efficiency transition ten-
dencies for countries and how institutional factors play a role.

Estimating technical energy efficiency

Conceptually, the measure of energy efficiency involves three steps. First, the actual energy use state
should be defined. The second step defines the benchmark or normative energy use state and the third
measures the extent of deviation of the actual energy use from the optimal or benchmark energy use. Theo-
retically, this study adopted the non-radial measure of input technical efficiency of Kopp.48‘Q1’ and ‘Q2’ in
Figure 1 represent the normative benchmark and actual energy use, respectively. Using the non-radial
measure, technical energy efficiency is the ratio of the distance KQ1 to the distance KQ2.

Empirically, this study adopts the stochastic energy demand frontier (SEDF) model proposed by Filippini
and Hunt.11 Within the framework of Filippini and Hunt,11 energy input is used to produce energy services
(which is the output). Mathematically, the SEDF is expressed as Equation 1:

EDit = f ðXit ; ; VÞeεit ; (Equation 1)

where εit = Vit  Uit , ED denotes the minimum energy required to produce energy services, t denotes the
time period and f ðÞ is the deterministic part of the stochastic energy demand frontier expressed as a func-
tion of other covariates. V is a vector of parameters that are associated with the deterministic part.
f ðXit ; VÞVit part of the SEDF captures the normative benchmark energy use whereas Uit captures the de-
viations from the optimal minimum amount of energy required to produce the energy service output.
Therefore, Uit measures the inefficiency in energy input use, which is assumed to have a half-normal distri-
bution. Vit is a two-sided error term with normal distribution. Linearizing Equation 1 produces Equation 2.

lnEDit = a0 + fðXit Þ + εit (Equation 2)

Technical inefficiency can result from either short-run moral hazards (such as delaying equipment replace-
ment and non-systematic managerial problems) or long run moral hazards (such as refusing to replace
obsolete equipment and structural problems in the production process in organization). Therefore, Co-
lombi et al.49 and Filippini and Hunt50 recommend decomposing technical inefficiency in energy consump-
tion into persistent and transient energy inefficiency. This distinction helps identifies areas of concern that
need policy intervention by the government. Therefore, following the recommendations of Colombi et al.49
and Filippini and Hunt,50 this study decomposed technical energy efficiency (inefficiency) into persistent
(time-invariant, ri ) and transient (time-varying, tit ).

Uit = ri + tit (Equation 3)

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The other reason is that estimating both persistent and transient energy efficiency has important implica-
tions for obtaining a consistent estimate of energy efficiency. Studies adopting the fixed approach by Corn-
well et al.51 to estimate persistent technical energy efficiency consider unobserved heterogeneities and
other country-specific effects as part of persistent technical efficiency. This implies that estimating persis-
tent technical efficiency this way could cause upward bias in the efficiency estimate. Similarly, the true fixed-
effect models by Greene52,53 used to compute the transient technical efficiency suffers from downward bias
as it ignores persistent technical efficiency.

To overcome this challenge, this study adopted the approach by Kumbhakar et al.,54 which performs a
simultaneous estimation of the persistent and transient technical efficiency in a multiple-stage manner.
The approach by Kumbhakar et al.54 decomposes the error component in 2 into four parts (Equation 4):
country latent heterogeneity (si ), persistent technical inefficiency (ri ), transient technical inefficiency (tit ),
and the two-sided noise term (Vit ).

εit = si + Vit  ðt it + ri Þ (Equation 4)

Inserting 4 into 2 gives the final empirical model (Equation 5) we estimate in the first stage analysis. Once
distributional assumptions are imposed on all four components, the maximum likelihood estimator can be
used to estimate Equation 5 simultaneously. Operationally in this study, three measures of energy con-
sumption, namely, total primary energy consumption (PECit ), electrical energy consumption (EECit ), and
gasoline energy consumption (GECit ) were used as the dependent variable in Equation (5).

lnEDit = a0 + fðXit Þ + si + Vit  ðt it + ri Þ (Equation 5)

55
To estimate the inefficiency component, the study adopted the approach by Jondrow et al., which is ex-
pressed in Equation (6).

EitF
EFFit = = exp ð Ui Þ = EFF Tit  EFF Pi ; (Equation 6)
Eit
where EitF denotes the normative energy consumption of the ith country at time t, and Eit is the observed
energy consumption. Overall energy efficiency is the product of transient (EFF Tit Þ and persistent energy ef-
ficiency (EFF Pi ).

Justification for variables included in the frontier equation

Price of energy (Pit ). There is a considerable literature on whether the price of energy significantly in-
fluences energy consumption or not.56 Although the debate is not very conclusive, the balance of evi-
dence is tilted to the view that increasing the price of energy can reduce energy consumption. This is
because the increase in price might induce behavioral change such as embarking on energy conservation
practices which might involve deliberate reorganization of how energy appliances are used and the pur-
chase of new improved technology that is more energy-efficient. Moshiri57 found that the energy price
reform (which lead to higher energy prices) in Iran provided an excellent opportunity to raise awareness
and educate individuals and businesses about the importance of energy conservation and energy effi-
ciency measures. At best, the first option for this study was to use the energy price index for primary en-
ergy, electricity price for electricity consumption, and gasoline price for gasoline consumption. However,
available data for cross-country on energy price index and electricity prices as compiled by Liddle and
Huntington58 are very irregular and inadequate for countries in Africa. Therefore, we adopt the sec-
ond-best option. In this study, two types of energy prices were used. First, the real price of crude oil
(P cr;it ) in USD$ per barrel was used as the price of primary energy consumption, which is energy that
has not gone through any form of conversion. Definitely, crude oil is just one form of primary energy,
and therefore using its price understates the actual price of primary energy consumption. A better
approach is to use an energy price index for primary energy consumption, but this kind of data is not
available for all countries over the period considered. For gasoline and electricity, we used the real price
of gasoline (P gsl;it ) which is measured in USD$ per liter as the price. In the case of electricity, this became
important as data on country-level electricity prices was not available for a majority of the countries
considered. Moreover, the literature provides evidence of the existence of a close connection between
oil and electricity markets,59 as the share of oil in the electricity generating mix is increasing. Tempera-
ture (T it ): The literature on the temperature effect on energy consumption is a bit ambiguous as both
positive and negative effects are possible.60 According to Zhang et al.,61 depending on the location
and type of energy, the effect of temperature can be positive or negative. Countries with varying

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temperatures that rely heavily on energy for cooling or heating will use more energy and incur higher
costs in procuring temperature-control technologies.62,63 These countries will become less energy effi-
cient and move further away from the frontier. Countries with temperatures that are neither warm nor
cool will be more energy efficient because they do not require energy for either cooling or heating.
Such results have led others to conclude that the effect of temperature is not linear.64 In this study,
we lean toward the view that temperature might exert a non-linear effect on energy consumption. There-
fore, we include temperature (T it ) and its square (T 2it ) in the frontier equation. Temperature here is
defined as the annual changes in temperature measured in degrees Celsius.

Gross domestic product per capita (RGDPpit Þ. There is a mutual interdependence between the econ-
omy and the development of the energy system. A higher per capita GDP can influence other aspects of
energy efficiency, such as the ability to invest in new technologies and increase capital stock. According
to some studies,65–67 GDP growth is a key factor in increasing both energy efficiency and energy con-
sumption. This is because industrial countries that use more energy-efficient technology will have higher
GDP per capita and conserve more energy than those that rely on second-hand imported gadgets that
are less energy efficient. On the other hand, raising GDP per capita can cause scale effects by increasing
the stock of energy-using appliances. All things being equal, such scale effects can drive energy con-
sumption upwards. This implies that depending on which effects dominate, increasing real GDP per cap-
ita might reduce or increase energy consumption. Therefore, in this study, we include the real GDP per
capita RGDPpit Þ and the square real GDP per capita (RGDPp2it ) as a measure of income in the frontier
equation. Population density (PDit ): The effect of population density on energy consumption is also
ambiguous.15,28 First, higher population density can induce a positive scale effect which would mean
more energy consumption appliances. On the other hand, a higher density may mean less commuting
time, which could make people shift toward other less energy-intensive mechanisms such as bicycling
and walking. In this study, we included population density to capture the demographic effect of energy
consumption. Population density in this study refers to the total population per square kilometer of land
area. Structural changes in the economy (SC it ): There are several studies that suggest that the structure
of production influences energy consumption.68 During the early stages of development, the structure of
production is likely to favor energy-intensive industries and this could increase the energy requirement.
However, in the latter stages of development, the composition of output is biased toward the less en-
ergy-intensive and non-polluting service sector. To address this concern, we include the share of industry
value added IV Ait Þ and service value added ðSV Ait Þ to capture the changing production mix in the econ-
omy in the frontier equation. Bank credit to private sector by banks ðBCPV it Þ: The debate on whether
the development of the financial sector drives energy consumption or not is not conclusive in the liter-
ature. One view argues that the development of the financial sector creates a business or wealth effect.
Financial sector development makes it easier to access relatively cheap capital that can be used to
expand existing businesses and/or establish new ventures. Chang69 and Çoban & Topcu70 found that
financial development has a significant positive impact on energy consumption and can influence energy
consumption through direct, business, and wealth effects. On the other hand, the development of the
financial sector can spur technological innovation, and cause energy consumption to fall.71 In this study,
we included bank credit to the private sector to proxy the depth of the financial sector in the frontier
equation. Bank credit to private sector refers to financial resources provided to the private sector by
other depository corporations (deposit taking corporations except central banks), such as through loans,
purchases of non-equity securities and trade credits, and other accounts receivable, that establish a
claim for repayment. For some countries, these claims include credit to public enterprises.72

Based on the chosen covariates for the frontier equation, Equations 7a, 7b, and 7c provide a more elabo-
rate form of Equation 5 for each of the energy types studied in this paper, which are the equations we es-
timate in the first stage analysis.

lnPECit = a0 + Fcr lnPcr;it + Frgdp1 lnRGDPpit + Frgdp2 ln RGDPp2it + Ftemp1 ln Tit

+ Ftemp2 lnT 2it + Fpd lnPDit + Fiva lnIVAit + Fsva lnSVAit

+ Fbcpv BCPVit + si + Vit  ðtit + ri Þ (Equation 7a)

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Figure 2. Transition between different energy states (efficient and inefficient state)

lnGECit = a0 + Fgsl lnPgsl;it + Frgdp1 lnRGDPpit + Frgdp2 ln RGDPp2it + Ftemp1 ln Tit

2
+ Ftemp2 lnT it + Fpd lnPDit + Fiva lnIVAit + Fsva lnSVAit
+ Fbcpv BCPVit + si + Vit  ðtit + ri Þ (Equation 7b)

lnEECit = a0 + Fgsl lnPgsl;it + Frgdp1 lnRGDPpit + Frgdp2 ln RGDPp2it + Ftemp1 ln Tit

2
+ Ftemp2 lnT it + Fpd lnPDit + Fiva lnIVAit + Fsva lnSVAit

+ Fbcpv BCPVit + si + Vit  ðtit + ri Þ (Equation 7c)

Estimate of energy efficiency transition tendencies

Based on information obtained from the previous section, we provide a definition of different energy effi-
cient states. Figure 2 shows the plot of different energy efficiency states based on transient energy effi-
ciency. This is because the transient component (i.e., short-term efficiency) captures the dynamic aspects
of technical energy efficiency over time. In a two-state model, we define high energy-efficient state (point
A) and low energy-efficient state (point B). At every point in time, countries provide information about
their energy efficiency status. Changing conventions and standards, lack of proper maintenance culture,
depreciation of existing technology, overutilization of existing technology, and behavioral dynamics can
make an attained high energy-efficient state weak and less sustainable and thereby induce a transition
toward a lower standard. This study is interested in predicting the probability of a country moving be-
tween or within different energy efficiency states in the future, giving the knowledge of current energy
efficiency states.

As shown in the figure, such outcomes are uncertain and follow the probability rule. Thus, a country can
either remain in the same state (A to AII) or transition to another state (A to AIII) at different times. Building
a probability distribution to describe such movements between and within states is called the Markov chain
and the corresponding probabilities are referred to as transition probabilities. Following the works of Kalb-
fleisch and Lawless,73 Kay,74 and Zhang and Adom,28an n-state Markov model is estimated. Equation 8 - the
conditional probabilities – says that the likelihood of country i to be in state Snob at time tn  1 depends on
knowledge of the previous state denoted as Snob 1 at time tn  1 . Once the conditional probabilities are
defined, the likelihood function can be derived as the product of all conditional probabilities associated
with the sample, which is shown in Equation 9, where the transition probability is specified as a function
of Wn . In this study, we controlled for regulatory quality (RQit ) and corruption control (CCRit ) in the vector
Wn . Although a number of conditions could influence the transition tendencies of countries, we keep the
model simple in this study to induce model convergence. This obviously creates the problem that the
exclusion of potential conditions could confound our results. Therefore, in this study, we do not suggest
any strong attribution claim. Rather, we claim that there is a likely association existing between institutional

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Table 1. Summary of data sources and units of measurement

Variables Unit of measurement Source

Total Primary energy Consumption (PEC)
Gasoline consumption (GEC)
Electricity consumption (EEC)
Real price of crude oil (Pcr )
Real price of gasoline (Pgsl Þ
Temperature (T)
Real GDP per capita (RGDPp)
Population density (PD)
Industry value added (IVA)
Service sector value added (SVA)
Bank credit to private sector (BCPV )
Regulatory quality (RQ)
Control of corruption (CCR)
Source: Authors’ own construction
Kilograms of oil equivalent The United States Energy Information Administration
Thousand Barrel per day The United States Energy Information Administration
GWh The United States Energy Information Administration
USD$/b BP Statistics Review of World Energy
USD$/liter Kpodar and Abdallah (2017), International Energy
Agency (IEA), Deutsche Gesellschaft Internationale
Zusammenarbeit (GIZ), WDI database
Degree Celsius The WB Climate Change Knowledge Portal
GDP (constant 2011 USD$) World Bank Development Indicator Database
Population per square kilometer of land area World Bank Development Indicator Database
%GDP World Bank Development Indicator Database
%GDP World Bank Development Indicator Database
% GDP World Bank Development Indicator Database
Index World Bank Governance indicators
Index World Bank Governance indicators

factors (captured here as regulatory quality and corruption) and the ability of countries to improve their
transitional tendencies to an energy-efficient state. Regulatory quality captures perceptions of the ability
of the government to formulate and implement sound policies and regulations that permit and promote
private sector development. Control of corruption captures perceptions of the extent to which public po-
wer is exercised for private gain, including both petty and grand forms of corruption, as well as ‘‘capture’’ of
the state by elites and private interests. The regulatory quality and control of corruption are index measures
with standard normal units that range from 2.5 to +2.5. We rescaled these variables to range from 0 to 1,
where higher values indicate better outcomes.


PSn  1;Sn = Pr Xt;n = Snob Xt;n  1 = Snob 1 (Equation 8)

The corresponding log-likelihood is derived as:

X
M X
K
LogLðFÞ = Dij;n log Pij ðWn Þ (Equation 9)
N = 1 i;j = 1

Sources and type of data

The study collected unbalanced panel data from 1995 to 2015 for 46 African countries across all sub-re-
gions. This makes the sample representative, which is good for deriving general statements for African
countries. Table 1 shows the variable names, the units of measure and the source of the data.

RESULTS AND DISCUSSION

Frontier determinants
Table 2 shows the coefficients of the stochastic energy demand frontier. The price elasticity is negative
and statistically significant in the case for gasoline consumption. The estimated coefficient suggests that
increasing the price of gasoline by 10% is associated with a 0.815% reduction in gasoline consumption.
This finding corroborates several others that support the view that taxing energy is one way to promote
energy conservation. The effect of income shows consistently an inverted U-shaped effect for all the en-
ergy types. This suggests that there is a threshold level of income that once reached any further increase
in income would be associated with lower energy consumption. This clearly implies that energy conser-
vation is closely connected to development. This corroborates the findings of Kim and Park75 and
Adom.76 The effect of temperature is also non-linear for primary energy and gasoline consumption.
This supports several other studies that found temperature to exert a non-linear effect on energy con-
sumption.60,64 The effect of population density is positive and statistically significant for all energy types.
This suggests that densely populated areas are important sources of demand pressures for energy.

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Table 2. Estimated results for the determinants of primary energy efficiency

(1) (2) (3)

Variables Primary energy consumption Gasoline consumption Electricity consumption
lnPcr;it 0.0301
(0.0215)
lnPgsl;it 0.0815* 0.0175
(0.0466) (0.0331)
lnTit 26.68*** 34.43** 12.00
(8.849) (13.51) (9.602)
lnT 2it 4.159*** 5.634** 1.648
(1.442) (2.207) (1.568)
lnRGDPpit 1.933*** 1.671*** 1.776***
(0.371) (0.615) (0.437)
lnRGDPp2it 0.0804*** 0.0698* 0.0710***
(0.0232) (0.0384) (0.0273)
lnPDit 0.927*** 0.850*** 1.604***
(0.105) (0.141) (0.100)
lnIVAit 0.122*** 0.120 0.0866
(0.0444) (0.0778) (0.0553)
lnSVAit 0.189*** 0.304*** 0.233***
(0.0568) (0.105) (0.0746)
lnBCPVit 0.0101*** 0.00980*** 0.00478***
(0.00144) (0.00233) (0.00166)
const 46.63*** 64.71*** 35.18**
(13.68) (20.88) (14.84)
Observations 894 671 671
R-squared 0.641 0.381 0.701
Number of ID 46 43 43
Standard errors are in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1. Column 1 is primary energy consumption, column 2 is
gasoline consumption and column 3 is electricity consumption.
Source: Authors’ construction, 2022.

Bank credit to the private sector exerts a positive and statistically significant effect on all energy types. This
supports the claim that the development of the financial sector can cause wealth/business effects, thereby,
causing energy consumption to rise. Adom71 also found that in Africa, the development of the financial
sector causes energy consumption to rise, but much more in economies with less-developed human cap-
ital. The effect of service sector value added is positive for gasoline but negative for primary energy and
electricity consumption. This suggests that a structural shift in production toward the service sector is likely
to reduce primary energy and electricity consumption. Industry value added has a positive and statistically
significant effect only on primary energy consumption. At least for primary energy consumption, the evi-
dence supports the claim that shifts to less energy-intensive sectors reduces the energy requirement
and hence energy consumption. This supports the conclusions of Zhang,77 Zhang et al.,78 and Filippini
and Zhang.15

Technical efficiency in energy consumption scores

Table 3 shows the average technical energy consumption efficiency scores by energy type. For total pri-
mary energy consumption, the overall mean technical efficiency is estimated at 22.88%, which suggests in-
efficiency at the level of 77.12%. As demonstrated in Figure 3, the kernel density plot is skewed to the right,
suggesting that the efficiency scores are asymmetrically distributed. This means that the mean, median,
and mode efficiency scores occur at different points. The present study underscores the importance of en-
ergy wastage in Africa, which was also highlighted in Adom et al.,27 Adom et al.,10 and Agradi et al.7 The

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Table 3. Average efficiency score by energy type

Type Obs Mean Std. Dev. Minimum Maximum

Primary energy consumption
Overall Efficiency 894 0.2288 0.1675 0.0026 0.6194
Transient Efficiency 894 0.8625 0.0543 0.4788 0.9549
Persistence Efficiency 894 0.2648 0.1928 0.0035 0.6777

Electricity consumption
Overall Efficiency 671 0.1806 0.1453 0.0022 0.5479
Transient Efficiency 671 0.8478 0.0684 0.3703 0.9709
Persistence Efficiency 671 0.2132 0.1670 0.0030 0.5860

Gasoline consumption
Overall Efficiency 671 0.2533 0.1683 0.0027 0.6628
Transient Efficiency 671 0.8515 0.0454 0.5521 0.9548
Persistence Efficiency 671 0.2980 0.1971 0.0033 0.7602
Source: Author’s construction, 2022.

sources indicate that inefficiency in primary energy consumption is more structural and long-term oriented,
suggesting that energy efficiency policies should rather target influencing long-term behaviors than short-
term behaviors. As demonstrated in Table 3, although persistent efficiency suggests an inefficiency of
73.52%, transient efficiency suggests an inefficiency score of 13.75%.

The overall mean efficiency score for electricity consumption is quite low (i.e., 18.06%), which implies inef-
ficiency in electricity consumption of about 81.94%. The kernel density plot in Figure 3 confirms the poor
performance in electricity consumption efficiency over the period under scrutiny. Adom78 estimates effi-
ciency in electricity consumption to range from 9% to 16%. According to the results, the high inefficiency
in electricity consumption is driven significantly by persistent inefficiency in energy consumption. Although
persistent inefficiency is estimated as 78.68%, transient inefficiency is 15.22%. Clearly, the picture portrayed
here suggests that the problem of inefficiency in electricity consumption is also structural in nature and
therefore requires energy policies that target influencing long-term behavior. In Africa, one major problem

Figure 3. Kernel density plot of efficiency scores for energy types

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Figure 4. Heat plot of primary energy

is the problem of inefficient appliances that form a significant share of household appliances. Moreover,
electricity theft and inefficient energy pricing regimes are predominant in the electricity sector, and these
conditions make it difficult to optimize the use of electricity.

Lastly, the overall mean efficiency in gasoline consumption is also low (i.e., 25.33%), which suggests an in-
efficiency of 74.67%. Also, the kernel density plot confirms the right-skewed distribution of gasoline con-
sumption efficiency. Similarly, Adom and Adams79 estimate a very low efficiency score for fossil fuels in
Africa. Given that the transport sector is the major consumer of gasoline fuel in Africa, the result depicts
high-level inefficiency in energy consumption in the transport sector. Similar to the above, persistent inef-
ficiency is the major driver, suggesting that energy policies to stimulate energy efficiency consumption in
the transport sector should focus on changing long-term behavior. A major problem in the transport sector
in Africa is the proliferation of second-hand cars, which are comparatively less efficient. Even though in
some African countries, there are attempts to ban over-aged cars, corruption makes it difficult to imple-
ment the policy to the latter. Another important factor is that the low-income status of the populace makes
it difficult for them to go for more energy-efficient cars, which are mostly expensive. Another possible
reason could be the poor maintenance culture among transport owners in the transport sector.

From the above, technical efficiency in energy consumption needs to improve significantly across Africa. As
shown in the heat maps (Figures 4, 5, and 6), few countries exceed the 50% efficiency threshold mark. This
demonstrates huge potential energy savings across African countries. Table 4 shows the estimated

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Figure 5. HeatMap of Gasoline consumption efficiency scores in Africa

potential energy savings because of energy efficiency over the period – computed as the product of energy
inefficiency and energy consumption. On average, Africa can save 48,489.69 kg of oil equivalent in primary
energy consumption per annum. Again, the mean energy saving potential in gasoline is estimated at 8.95
thousand barrels per day per annum whereas the mean energy savings for electricity is estimated at 6.242
GWh per annum. Figure 7 shows the time series plot of potential energy savings, averaging at the country-
level means. For primary energy, electricity, and gasoline, there is a general upward trend in potential en-
ergy savings, which suggests that African countries are yet to pick most of the ‘‘low-hanging fruit’’. This cor-
roborates with the findings of Liddle and Sadorsky80 who found that energy savings have been rising for
non-OECD countries but have been falling for OECD countries. To address this concern of tapping into
the potential energy savings in African countries, the solution does not lie in short-term oriented energy
policies but rather in long-term oriented energy policies that are aimed to change long-term behavior.
This involves a combination of factors such as the establishment and enforcement of energy efficiency
regulation, improving the institutional environment, and designing the right kind of incentives that stimu-
late investments in technological innovation among individuals and firms.

Energy efficiency transition tendencies

Based on the estimated transient energy efficiency, we derived two energy efficiency states (high and low).
Periods where a country obtained the 75th percentile and more of the transient energy efficiency score is
designated as the high energy efficient state (HEE). All periods where a country obtained scores below the
75th percentile of the transient energy efficiency were designated as the less energy efficient state (LEE).

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Figure 6. HeatMap of Electricity consumption efficiency scores in Africa

Given these two different energy efficient states, the task here is to obtain (1) the persistence level of each
state and (2) the transition tendency from one state to another. This requires that we estimate the transition
probabilities, which requires the use of the Panel Markov-switching regression. In estimating the Panel Mar-
kov-switching model, the transition intensities were made to be time-in-homogenous. This is because as
new information becomes available, it may enable the tendency to transition; therefore, assuming time ho-
mogeneity in the transition intensities may defy reality. In analyzing the energy transition tendency, we
assumed the base period to be the first year, where we observe a country’s transition either out or within
the same energy efficient state. Because, technologies may take time to depreciate and countries may
require time to adopt and learn of new technologies,28 we expect that in the first year, both the less energy
efficient and high energy efficient states would be more persistent. Thus, any possible transition should be
expected in the fifth (i.e., medium term) and tenth (i.e., long term) years. Providing these different timings
helps us appreciate the evolution of the transition process in the short-term, medium-term, and long-term.

Table 4. Potential energy savings

Ob Mean Stand dev Min Max

Primary energy savings 894 48,489.69 117,405.5 256.42 724,884.6
Gasoline savings 671 8.953177 18.22502 0.0997074 92.96619
Electricity savings 671 6.242015 13.15669 0.0397341 103.8831

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Figure 7. Potential Energy savings through energy efficiency

Energy efficiency transition tendencies for primary energy consumption

Table 5 contains information about the transition intensity and probabilities of each state. It shows that,
in the very first year, both LEE and HEE states are more persistent. This suggests that transition tendency
out of either state in the first year is less likely. According to the estimates, the probability of getting lock-
in at LEE and HEE states in the first year are 89.97% and 69.02%, respectively. However, comparatively,
the probability suggests that it is relatively difficult to transition out from the LEE state than from the HEE
state. This narrative is the same even in five and ten years’ time. As shown in the table, given that a coun-
try is in LEE state now, there is a 77.3 and 75.7% chance of still remaining in LEE state. The above prob-
abilities suggest that given that a country is in the LEE state, there is a 10.03%, 22.7%, and 24.32% chance
to transition to HEE state in the first, fifth and tenth year, respectively. The estimated duration in years for
the LEE state is 10.28 years.

On the contrary, the HEE state is less stable. The probability of remaining in the HEE state reduces from
69% in the first year to 29% and 24.83% in the fifth and tenth years, respectively. This suggests that the tran-
sition tendency out from the HEE state is high. As captured in the table, the transition tendency out from
the HEE to LEE state is 70.15% and 75.17% in the fifth and tenth year, respectively. The estimated duration
in years for the HEE state is 2.72 years.

Clearly, the above results mean that energy efficiency gains are less sustainable in the medium to long-term
in Africa. In other words, improvements in energy efficiency are short-lived. This corroborates the findings
of Zhang and Adom,28 Adom,11 and Adom and Adams26 who found that energy inefficiency is more persis-
tent and difficult to escape from in China, Cameroon, and Nigeria. A good explanation for this outcome is
the non-robust energy efficiency policies that are implemented in Africa. A large part of African countries
do not have concrete energy efficiency policies and where they do even exist, they are weak in structure,
design, and implementation. Another important explanation could be the prevailing energy subsidies
that discourage investment in innovation. Poor structures and undeveloped markets in Africa could also
be a contributing factor. Finally, weak and poor institutional structures hinder the strict implementation
of energy efficiency programs. Clearly, the results demonstrate the urgent need for reform in Africa’s en-
ergy efficiency policies.

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Table 5. Transition probabilities for primary energy efficiency

Transition probabilities
State switch Transition intensities First year Fifth year Tenth year
LEE LEE 0.1223 (0.1571, 0.0952) 0.8997 (0.86228, 0.9290) 0.7730 (0.7027, 0.8352) 0.7568 (0.6707, 0.8228)
LEE HEE 0.1223 (0.0952, 0.1571) 0.1003 (0.07097, 0.1377) 0.2270 (0.1648, 0.2973) 0.2432 (0.1772, 0.3293)
HEE LEE 0.3750 (0.2883, 0.4879) 0.3098 (0.2327, 0.3994) 0.7015 (0.6076, 0.7848) 0.7517 (0.6626, 0.8188)
HEE HEE 0.3750 (0.4879, 0.2883) 0.6902 (0.6006, 0.7673) 0.29 (0.2152, 0.3924) 0.2483 (0.1812, 0.3374)

Low High
Average duration to switch between states (Years) 10.284 2.716
2.5% 9.432 1.9395
97.5% 11.060 3.5679
Observation 891
Note: Figures in parentheses represent lower and upper confidence intervals at 95%.
Source: Author’s construction, 2022.

Energy efficiency transition tendencies for electricity consumption

Table 6 shows the transition probabilities or tendencies for different electricity use efficient states. For the
first year, both LEE and HEE states are more persistent, with probabilities of retention estimated at approx-
imately 93% and 80%, respectively. This suggests that in the first year it is relatively difficult to transition out
of HEE and LEE, although comparatively, the transition tendency for the former could be classified as being
relatively easy than the latter. Nonetheless, the high probability values suggest that both states are more
stable in the first year. For LEE, this suggests that it is extremely unlikely for countries in Africa to transition
out of a low energy-efficient trap. For HEE, this implies that once African countries succeed in transitioning
to HEE state, it is less likely to transition out in the first year. However, the narrative changes in the fifth and
tenth years. The LEE state remains persistent and stable with the probabilities of retention of 78.5 and
75.25%, respectively. This suggests that even for the medium to long term, once African countries are
caught in a low energy-efficient trap, it is extremely difficult to get out of it. As the table shows, the tran-
sition tendencies out from the LEE state to the HEE state in the fifth and tenth years are estimated as
20.50% and 24.75%, respectively. The duration for the LEE state is 10.45 years. The high persistence in
the less energy-efficient state suggests that without a drastic intervention, these economies may find it
extremely difficult to catch up with the high energy-efficient state. This gap in transition tendencies for
countries in Africa could be a dent in the United Nations’ effort to improve energy efficiency significantly
to minimize the environmental damage effects associated with the use of energy.

In contrast, we see that the HEE state becomes less stable in the fifth and tenth years. The tendency for
countries to maintain a high energy-efficient state reduces drastically from approximately 80% in the first
year to 41.22% in the fifth year and then to 29.04% in the tenth year. This suggests that gains achieved in
electrical energy efficiency are less sustainable and may exhibit rhythmic paths, which could impede prog-
ress toward achieving universal energy for all and reduction in energy carbon content emissions. On the
policy side, it reflects how weak energy efficiency policies and programs implemented particularly in the
electricity sector have been.

In the electricity sector, a number of reasons may account for this situation. First, most cooling, heating, and
cooking appliances in Africa are not in a very good shape. A large number of consumers depend on sec-
ond-hand types of cooling, heating, and cooking appliances, which are highly inefficient. This trend is
caused by the low-income status of people in Africa. Second, behavior change may contribute significantly
to the outcome observed. The low-income status of people in the continent makes them indulge in legal
practices such as electricity theft to reduce their energy cost. The prevalence of electricity theft works
against every virtue of energy efficiency, as people do not see the need to upgrade the appliance stock.
Another important reason could be cultural, as people may develop aversion to technological switch espe-
cially when they are not very convinced about the benefits of the technology. Last, but not the least, poor
maintenance culture among people in Africa makes their appliances depreciate faster than normal. Finally,
an undeveloped market or imperfections in the market for electrical gadgets makes it conducive for inef-
ficient appliances to dominate the market space. Therefore, for a consumer who may have the willingness

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Table 6. Transition probabilities_ Electricity

Transition probabilities
State switch Transition intensities First year Fifth year Tenth year
LEE LEE 0.0760 (0.1024, 0.0565) 0.9302 (0.8938, 0.9533) 0.7950 (0.7120, 0.8588) 0.7525 (0.6477, 0.8296)
LEE HEE 0.0760 (0.0565, 0.1024) 0.0698 (0.0467, 0.1062) 0.2050 (0.1412, 0.2880) 0.2475 (0.1704, 0.3523)
HEE LEE 0.2386 (0.1773, 0.3212) 0.2002 (0.14364, 0.2801) 0.5878 (0.4505, 0.7102) 0.7096 (0.5878, 0.7991)
HEE HEE 0.2386 (0.3212, 0.1773) 0.7998 (0.71989, 0.8564) 0.4122 (0.2898, 0.5495) 0.2904 (0.2009, 0.4122)

Low High
Average duration for states (Years) 10.446 2.554
2.5% 9.434 1.685
97.5% 11.315 3.566
Observation 691
Note: Figures in parentheses represent lower and upper confidence intervals at 95%.
Source: Author’s construction, 2022.

to upgrade technology, underdeveloped markets and imperfections in the market may not make it
possible for such a consumer to complete the switch to newly improved technologies.

Energy efficiency transition tendencies for gasoline fuel

Table 7 depicts the transition probabilities for gasoline consumption efficiency. From the table, both LEE
and HEE states are persistent in the first year, indicating that once these states are obtained, it is very un-
likely to transition out of these states in the first year. As shown in the table, the probabilities that a country
that has achieved LEE and HEE states would remain in those states in the first year are 92.28 and 70.33%,
respectively. This shows that, relatively, the LEE state has a high degree of persistence in the first year than
the HEE. In the medium term, we find that the degree of persistence for the LEE reduces to 81.35% in the
fifth year and then to 79.55% in the tenth year (i.e., long-term). These statistics suggest that for countries
that are locked in the LEE state, converging toward the HEE state is a much more difficult goal in the me-
dium and long-term. Notwithstanding, the tendency to converge to the HEE state improves in the medium
to long-term. As noted in the table, in the fifth and tenth years, the probability of transitioning out of the
LEE state to the HEE improves from 7.7% in the first year to 18.65% in the fifth year and then to 20.45% in the
tenth year, respectively. The duration for the LEE state is approximately 11 years. This confirms that most
African countries are locked in a low energy-efficient trap, which might take more than a decade to escape
from it.

In contrast, the HEE state becomes less stable in the fifth and tenth years. According to the estimate, the
probability of remaining in the HEE state in the fifth and tenth years is 28.28 and 21.37%. These drastic re-
ductions in the persistence of the HEE state indicate that energy efficiency gains in gasoline consumption
are short-lived. As shown in the table, the duration for an energy-efficient state is approximately 2 years.
These results cast doubt on the robust nature of energy efficiency programs implemented in the transport
sector, which is the major consumer of gasoline fuel. As indicated earlier, the transport sector in Africa is
flooded with used inefficient and sometimes over-aged cars that are more energy intensive. Even though
in some countries, there are either bans or penalties for importing over-aged cars, bureaucratic ineffi-
ciencies, high corruption, and weak regulations make it difficult to implement these policies in their very
strict sense. Again, in the transport sector, poor maintenance culture is another important factor that makes
the HEE state less sustainable.

Transition tendency and the role of regulatory quality and control of corruption
This section provides results on whether institutional factors contribute to a country’s transitional ten-
dencies for energy consumption efficiency. Table 8 shows the computed hazard ratio for control of corrup-
tion and regulatory quality. For primary energy, regulatory quality has a 55.38% lower chance of helping a
country transition from LEE to HEE state. This indicates a lower association between transitioning to the
HEE state and improving regulatory quality. On the contrary, by controlling for the level of corruption,
countries that are in the LEE state have a 95.43% higher chance to transition to the HEE state. This indicates

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Table 7. Transition probabilities_ Gasoline

Transition probabilities
State switch Transition intensities First year Fifth year tenth year
LEE LEE 0–0.1146 (0.14867, 0.08829) 0.9228 (0.8877, 0.9462) 0.8135 (0.7360, 0.8707) 0.7955 (0.7119, 0.8592)
LEE HEE 0.1146 (0.8829, 0.14867) 0.07716 (0.0538, 0.1123) 0.1865 (0.1293, 0.2640) 0.2045 (0.1408, 0.2881)
HEE LEE 0.3619 (0.28224, 0.46408) 0.2967 (0.2239, 3876) 0.7172 (0.6029, 0.8088) 0.7863 (0.6948, 0.8527)
HEE HEE 0.3619 (0.46408, 0.28224) 0.7033 (0.6124, 0.7761) 0.2828 (0.1912, 0.3971) 0.2137 (0.1473, 0.3052)

Low High
Average duration to switch between states (Years) 10.7567 2.243
2.5% 9.900 1.5100
97.5% 11.490 3.100
Observation 691
Note: Figures in parentheses represent lower and upper confidence intervals at 95%.
Source: Author’s construction, 2022.

a strong positive association exists between controlling for corruption and transitioning to a higher energy-
efficient state. High corruption as earlier indicated can reduce the stringency of energy policy and make
individuals and firms divert their managerial effort away from productive processes toward unproductive
processes that oblige them to use technologies that are mostly energy intensive. Moreover, higher corrup-
tion could make individuals and firms very prone to paying bribes as a strategy to compensate for the envi-
ronmental cost of their production and consumption activities. Therefore, by controlling the level of
corruption, the stringency of environmental and energy policies and programs might improve and efforts
of individuals and firms could be diverted to investing in more innovative technologies that are much more
environmentally friendly. A number of studies have provided evidence to support the claim that by control-
ling the level of corruption, energy efficiency could improve24,47,81

In the case of electricity, the result shows that regulatory quality has a 27.9% lower chance of helping a
country transition from a less energy-efficient state to a high energy-efficient state, which suggests a
weaker association between regulatory quality and the electricity consumption transitional tendency. How-
ever, controlling for the level of corruption has a 42.9% higher chance of helping countries transition to a
high energy-efficient state when in a less energy-efficient state. In some African countries, even though
there are regulations on appliance and labeling standards, sub-standard appliances still flood the African
market because of the prevalence of high corruption. Moreover, electricity theft and meter tempering,
which are predominant in most African countries’ electricity sectors, are perpetuated by clients who are as-
sisted by technical staff from the electricity company. These clients bribe technical staff from the electricity
company to help them temper the meter so it does not give the correct readings. In exchange, the client
benefits from a significantly reduced electricity price. Consequently, for such a client, it makes no sense to
invest in technological innovation, which is mostly capital-intensive. Therefore, by controlling the level of
corruption, countries in Africa can minimize side-stepping regulations and electricity theft and thereby
improve the efficient use of electricity.

Finally, in the case of gasoline fuel, improving regulatory quality increases the chances of transitioning from a
less energy-efficient state to a high energy-efficient state by 15.9% higher, confirming Porter’s hypothesis.
Improving regulatory quality can divert efforts toward improving technological innovation. For instance, the
regulation of Japanese vehicular technologies paved the way for the efficient usage of gasoline.80 In Africa,
the bulk of cars imported into the continent are used vehicles which are sub-standards, and regulations to
restrict the importation of these kinds of cars currently remain either weak or non-existing. Coupled with
poor fuel quality in the continent, this is causing severe health challenges, especially for school children
who walk by roadsides to school. In February 2020, the Economic Community of West African States with
the support of the United Nations Environment Program organized a meeting of environmental and energy
ministers. The outcome of this meeting was to adopt comprehensive sets of standards for clean fuel and ve-
hicles in the sub-region. Among other things, the regulation sets a target for fuel efficiency for imported cars,
which was to double from an average of 8 L per 100 km to 4.2 L per 100 km by 2030. In the interim, the com-
mittee set an intermediate target of 5 L per 100 km by 2025.82 Other countries like Ghana and South Africa have

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Table 8. Estimated effect of regulatory quality and control of corruption on energy efficiency transition tendency

95% confidence
interval
Transitioning Hazard ratio Lower Upper Obs
Primary energy 894
Regulatory quality LEE HEE 0.4462 0.2294 0.8678
Control for Corruption LEE HEE 1.9543 0.9879 3.866

Electricity 691
Regulatory quality LEE HEE 0.7210 0.3316 1.568
Control for Corruption LEE HEE 1.429 0.6776 3.012

Gasoline 691
Regulatory quality LEE HEE 1.159 0.5974 2.248
Control for Corruption LEE HEE 0.5698 0.2778 1.1685
Source: Authors’ construction, 2022.

implemented fuel economy measures including differential taxes for vehicles in South Africa and a ban on
over-aged cars in Ghana. These countries are also providing incentives to promote the uptake of electric
vehicles in the economy. These initiatives provide evidence to support the findings of this study, which under-
scores the need to improve the regulatory environment, particularly for the transport sector – a major con-
sumer of gasoline fuel.

However, the success of these standards in the gasoline sector depends on the level of corruptibility of
state officials. As indicated by Oliva,83 environmental regulation may be compromised by corruption. In
that study the author finds that 9.6% of car owners paid US$20 to circumvent the regulation on vehicle emis-
sion in Mexico. This implies that corruption may exert a significant effect on the transition to an energy effi-
cient state. As demonstrated in the table result, controlling for corruption increases a country’s chance to
transition out of a less energy-efficient state to a high energy-efficient state by 56.98% higher. Even though
there are some existing regulations to improve fuel economy, owners of cars may bribe officials to circum-
vent the regulation.

Goodness of Fit test for Panel Markov-Switching Regression.

To test for the goodness of fit of the PMSR, this study adopted two popular tests; the prevalence and Pear-
son tests. The Prevalence test basically compares the predicted states to the observed states, assuming
that all countries can be observed at all times under consideration. Figures 8, 9, and 10 show the prevalence
plots for primary energy, gasoline and electricity. These graphs show that for some years, the model
correctly predicted the actual observed states. That notwithstanding, for some years, we notice either un-
derestimation or overestimation of the actual observed states. This means that based on the prevalence
plot alone we cannot provide very conclusive evidence on the goodness of fit for the estimated models.
Therefore, we performed the Pearson test, which provides more robust findings on the model fitness.
Table 9 shows the Pearson test. Consistently, for all the energy types, the upper bound pvalue is greater
than 10%, which suggests that all the models are of good fit.

DISCUSSION
Using data from Africa, this study has examined the energy efficiency transition tendencies and the role that
control of corruption and regulatory quality play in transitioning to an energy efficient state. Our approach
combined a Panel Stochastic Frontier technique with a Panel Markov-Switching regression technique. In
terms of novelty, this study expands earlier contributions of Adom,11 Adom and Adams,26 and Zhang
and Adom28 by estimating energy efficiency transition tendency for a cross-country panel data and how
institutional factors influence energy efficiency transitional tendencies. The following are major highlights
from the study.

Technical efficiency in primary energy, gasoline and electricity consumption is estimated as 23%, 25% and
18%, respectively. This suggests high levels of energy inefficiency of 77%, 75%, and 82% for primary energy,

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Figure 8. Prevalence test for primary energy

gasoline, and electricity. The result has shown that a large part of these inefficiencies in energy consump-
tion is structural in nature, suggesting that addressing technical energy inefficiency requires designing pol-
icies and programs with the aim to change long-term behavior. Based on the estimated mean technical
efficiency in energy consumption for the different fuels, the estimated mean annual potential energy sav-
ings is 28,569.77 kg of oil equivalent for primary energy consumption, 3.976 GWh for electricity, and 7.289
thousand barrels per day for gasoline on the average.

On the transition tendencies of countries, this study has shown that, for all the energy types, African coun-
tries are locked in a low energy-efficient trap, which corroborates previous findings in the literature.
Transitioning to a high energy-efficient state is possible only in the long-term, but with a moderate chance.
These results suggest that without proper intervention, achieving regional targets such as sustainable
energy for all through energy efficiency improvements in Africa would be a difficult goal to achieve. Further-
more, this study has shown that control of corruption and regulatory quality are correlated with energy ef-
ficiency transition tendencies of countries. Therefore, countries that take aggressive measures to curtail
corruption and at the same time improve the quality of regulation stand a higher chance to speed up their
convergence process toward a higher energy-efficient state. In other words, countries with better institu-
tions are more likely to achieve the goal of energy efficiency. This corroborates Porter’s hypothesis that
strengthening the institutional environment, particularly in the area of energy and environmental regula-
tion could spur innovation drive among individuals and firms and hence improve energy efficiency.

The following implications can be derived from the results. First, with significant potential in energy
efficiency yet to be tapped in Africa, our results underscored the need for governments in Africa to
intensify their efforts toward improving energy efficiency. In this regard, the design of energy efficiency pol-
icies and initiatives should be aimed at changing long-term behavior, such as instituting national energy
efficiency policy and designing and implementing incentives to boost investment in energy-efficient
technologies.

Second, developing and strengthening institutions are key to improving energy efficiency transitional ten-
dencies of countries in Africa. What this suggests is that energy efficiency policies and programs should not
be developed in isolation without taking into account the institutional environment required for these pol-
icies and programs to succeed. Based on the result of this study, local governments should implement
measures to strengthen regulations as well as curtail the incidence of corruption.

The current study adopted a cross-country macro panel approach. A more interesting future extension of
the current study would be to understand the problem at the firm and household levels.

iScience 26, 106262, March 17, 2023 19

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OPEN ACCESS Article

Figure 9. Prevalence graph for gasoline fuel

Limitations of the study

The current study has some challenges. First, improving the transitional tendencies toward energy effi-
ciency can be complex and multifaceted. Given the simplified nature of the model adopted in this study,
the result is likely to be confounded by other unobserved heterogeneities and potential omitted variables.
Therefore, we do not claim any strong attribution in this study. At best, this study provides relational or
correlational evidence between institutional factors and energy efficiency transition tendencies for coun-
tries in Africa.

Second, energy efficiency is a development issue. This means that the path for transitional tendencies
might be different depending on the level of economic development. Not acknowledging these
heterogeneities could also introduce some bias in the estimated transitional tendencies toward energy
efficiency. Unfortunately, the African region does not offer significant variability when it comes to the

Figure 10. Prevalence test for electricity consumption

20 iScience 26, 106262, March 17, 2023

iScience ll
Article OPEN ACCESS

Table 9. Pearson test of goodness of fit

Energytype Pearson statistics Lower bound p-value Upper bound p-value

Primary energy 23.3852 0.0094 (10) 0.17622 (18)
Electricity 12.6088 0.24637 (10) 0.8143 (18)
Gasoline 14.0167 0.1722 (10) 0.728 (18)
Figures in parentheses denote the degrees of freedom.
Source: Author’s own computation, 2022

level of economic development. Few countries could be described as developed with the remaining
underdeveloped.

Third, economic growth is not decoupled from energy and environmental outcomes. This interdepen-
dence existing between energy outcomes and economic activities suggests that the real GDP variable
in the frontier equation may be exogenous because of reverse causality from energy consumption. Failing
to address this concern might introduce bias in the coefficient estimate. However, within the Kumbhakar
et al.54 framework, we are not aware of an existing approach currently that addresses this endogeneity
problem. Therefore, we acknowledge there might be some remaining bias still present in the estimated
energy efficiency scores in this study.

Lastly, this study acknowledges the data challenges with some of the price variables used in this study.
Except for gasoline consumption where we used the actual prices of gasoline as reported from each
country, we used crude proxies for primary energy price and electricity consumption. This means
that only the price variable in the gasoline equation can be interpreted as the own-price elasticity of
gasoline consumption. For primary energy consumption and electricity, we caution that the estimated
price elasticity in these models does not connote the own-price elasticity but partial own-price
elasticity.

STAR+METHODS
Detailed methods are provided in the online version of this paper and include the following:

d KEY RESOURCES TABLE

d RESOURCE AVAILABILITY
B Lead contact
B Materials availability
B Data and code availability
d QUANTIFICATION AND STATISTICAL ANALYSIS

ACKNOWLEDGMENTS
We acknowledge comments from four anonymous reviewers and the editor which have helped
improved the earlier version of this manuscript. The authors also acknowledge the support of the Envi-
ronment and Natural Resource Research Initiative (ENRRI) – Environment for Development (EfD) Ghana
hub, Environment for Development (EfD) Global, Sweden, as well as the Sustainable Energy Transition
Initiative (SETI)-EfD. Lastly, the authors acknowledge the support of the GIMPA-PURC Center of Excel-
lence in Public Utility Regulation (CEPUR). The usual disclaimer applies.

AUTHOR CONTRIBUTIONS
C.D.A.: Conceptualization, Data curation, Formal analysis, Investigation, Software, Methodology, Visuali-
zation, Validation, Writing – original draft, Writing – review and editing.

P.K.A.: Conceptualization, Data curation, Formal analysis, Investigation, Software, Methodology, Visualiza-
tion, Validation, Writing – original draft, Writing – review and editing.

DECLARATION OF INTERESTS
There are no competing interest.

iScience 26, 106262, March 17, 2023 21

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OPEN ACCESS
INCLUSION AND DIVERSITY
We support inclusive, diverse, and equitable conduct of research.
Received: June 20, 2022
Revised: January 23, 2023
Accepted: February 17, 2023
Published: February 24, 2023
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STAR+METHODS

KEY RESOURCES TABLE

REAGENT or RESOURCE SOURCE IDENTIFIER

Deposited Data
Analysed data Kpodar and Abdallah,84 World Bank,85 Upon request.
World Bank Climate Change Knowledge
Portal,86 BP Statistical Review of World Energy,87
US Energy Information Administration88

Software and algorithm

STATA V.15 STATA Version 1589 www.stata.com
R V 4.1.2 R Version 4.1.290 www.rstudio.com

RESOURCE AVAILABILITY
Lead contact
All requests regarding data and codes and clarification of the manuscript should be directed to the corre-
sponding author Philip Kofi Adom (padom@gimpa.edu.gh/adomonline@yahoo.co.uk). These correspon-
dences should be done with Charity Dzifa Akorli (charitydzifa@gmail.com) in copy.

Materials availability
This manuscript did not employ any physical material. It is a pure dataanalysis work.

Data and code availability

d All the data used in this manuscript have legal host. Interested readers have to contact these hosting in-
stitutions for the data. In some cases, the data is free but others may be acquired through request or pur-
chase. We have provided all the sources of the data in the main manuscript.
d The data and codes used to obtain the results in this study can be made available to interested readers
upon reasonable request from the corresponding author.
d Further clarification and information on the manuscript and data should be addressed to the correspond-
ing author with the coauthor in copy.

QUANTIFICATION AND STATISTICAL ANALYSIS

 The details of the method used to generate the results in this document have been sufficiently
described in the main text of the manuscript.
 First, in estimating the stochastic frontier model, we used the STATA software. The same was used to
generate the different energy efficient states. So all efficiency scores as well as energy saving poten-
tial were obtained with the STATA software.
 R was used to estimate the panel Markov-switching regression, where we analysed transitional ten-
dencies of countries between the states of energy efficiency identified.
 The maps were created using the mapchart.net.

iScience 26, 106262, March 17, 2023 25