Can energy conservation and substitution mitigate CO2 emissions in electricity generation? Evidence from Middle East and North Africa

Abstract

This study objectively investigates the influence of energy conservation and substitution strategies in mitigating CO₂ emissions in the electricity generation sector in Middle East and North Africa (MENA) region. The paper specifically explores if climate action implementation may negatively affect energy consumption on economic growth ambition and whether technical change in factor and inter-fuel substitution support in achieving sustainable development goals (SDGs) 7, 8 &13. This paper conducts the study under the life cycle analysis (LCA) procedure. We also apply stochastic frontier Translog production and ridge regression techniques with data for 2000-2015. The results currently show that renewable energy intensity falls below the breakeven level. Meanwhile, nonrenewable energy intensity is much higher. Furthermore, production factors and inter-fuel technological change show that capital-energy and renewable-nonrenewable energy are perfect substitutes under the electricity sector. Moreover, the findings reveal low energy efficiency of 40 percent with poor carbon performance. We, therefore, conclude that MENA region may not achieve cleaner, affordable energy and climate action concurrently with economic growth under the current production technologies by the fiscal year 2030. We further conclude that economic growth is presently inversely related to energy efficiency but positively with energy intensity. This suggests that MENA region economic growth drive is highly linked with nonrenewable consumption and also not supporting energy conservation strategies. Additionally, we conclude that energy efficiency improvement and reduction in energy intensity may not be achieved as the governments keep subsidizing electricity in the region. Besides, the more policymakers pursue economic growth through energy intensity indicators, the more energy is consumed through the energy rebound effects. Based on these findings and conclusions, we recommend insightful strategies under the electricity sector. This study adds new body of knowledge by extending Translog production to estimate energy intensity & efficiency under the LCA procedure. Scholars also contribute to data and variable modeling under the SDGs in discovering CO₂ emission mitigation in the electricity sector which could be replicated in other countries or regions.

Keywords: Carbon efficiency frontier; Decarbonizing electricity sector; Eco-efficiency; Renewable energy substitution prospects; Stochastic frontier translog technique.