Energy efficiency in South Africa : a decomposition exercise

Abstract

Improvement of energy efficiency has been accepted as one of the most cost-effective approaches towards sustainable economic development and reduction of the continuously increasing energy consumption internationally. South Africa, being among the developing countries, is not an exception even though historically low energy prices and the lack of appropriate policies have created an energy intensive economy. This paper examines the factors affecting the trends in energy efficiency in South Africa from 1993 to 2006 and particularly the impact of structural changes and utilisation efficiency of the country's energy intensity. Identifying and understanding the driving forces are necessary ingredients in the development of appropriate policy-making. This paper also provides disaggregation of the energy efficiency trends in the main sectors of the economy. We determine that structural changes of the economy have played an important and negative role in the increasing economy-wide energy efficiency. On the other hand, the energy usage's intensity was a contributing factor to the decreasing trend of energy efficiency. We suggest that differentiated price policies may be required if South Africa is to create an effective energy efficiency policy.