Impact of Climate Commitment on the Nexus between Institutional Quality and Private Investment in off-Grid Renewable Electricity in Sub-Saharan Africa (SSA)


Authors : Akono Etienne B.; Mandjeng Bekima Paul A.

Volume/Issue : Volume 9 - 2024, Issue 12 - December

Google Scholar : https://tinyurl.com/4kh8nf56

Scribd : https://tinyurl.com/38a8nwtm

DOI : https://doi.org/10.5281/zenodo.14576656

Abstract : This study examines the impact of institutional quality on private investment in off-grid renewable electricity in Sub-Saharan Africa (SSA), and analyses how climate commitment affects the relationship between the two factors. The analysis covers the period 2010 to 2022 and uses Generalised Method of Moments estimation to deal with endogeneity on a panel of SSA countries divided into five samples: Sub-Saharan, Central, Southern, East and West Africa. Firstly, our results indicate that institutional quality acts as an obstacle to private investment in off-grid renewable electricity, but the effect is not significant in all samples. Secondly, in some cases, they provide significant evidence for the existence of an interaction effect between institutional quality and climate commitment in promoting private investment in off-grid renewable electricity. A 1% increase in the interaction effect increases private investment by 11.7% in SSA, 3.3% in the East and 20% in the West. These findings have important policy implications, particularly the need for SSA countries to strengthen their climate action through electricity sector decarbonisation plans and energy efficiency policies that are attractive to climate finance.

Keywords : Off-Grid Renewable Electricity, Private Investment, Institutional Quality, Climate Commitment, Interaction Effect, Dynamic Panel Data Models.

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This study examines the impact of institutional quality on private investment in off-grid renewable electricity in Sub-Saharan Africa (SSA), and analyses how climate commitment affects the relationship between the two factors. The analysis covers the period 2010 to 2022 and uses Generalised Method of Moments estimation to deal with endogeneity on a panel of SSA countries divided into five samples: Sub-Saharan, Central, Southern, East and West Africa. Firstly, our results indicate that institutional quality acts as an obstacle to private investment in off-grid renewable electricity, but the effect is not significant in all samples. Secondly, in some cases, they provide significant evidence for the existence of an interaction effect between institutional quality and climate commitment in promoting private investment in off-grid renewable electricity. A 1% increase in the interaction effect increases private investment by 11.7% in SSA, 3.3% in the East and 20% in the West. These findings have important policy implications, particularly the need for SSA countries to strengthen their climate action through electricity sector decarbonisation plans and energy efficiency policies that are attractive to climate finance.

Keywords : Off-Grid Renewable Electricity, Private Investment, Institutional Quality, Climate Commitment, Interaction Effect, Dynamic Panel Data Models.

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