| Summary: | This study aims to provide a decomposition analysis on aggregate energy intensity in Ethiopia over 1990–2017 using Logarithmic Mean Divisia Index (LMDI) I decomposition method. It also investigates the main driving forces influencing the observed energy intensity trend in the presence of a structural break. The LMDI I decomposition results indicate that the efficiency component has played a prominent role in reducing the overall energy intensity while the contribution of structural component for the change in total intensity has been very negligible. On the other hand, the model estimation results with structural break invariably confirm that economic growth, modern renewable energy, and institutional quality appear to have a significant negative effect on total energy intensity in the long run (contribute positively for energy efficiency improvement) while industrialization and FDI stock tend to induce higher energy intensity. Further, modern renewable energy negatively moderates the effect of growth and industrialization on energy intensity. After all, the results suggest the need for giving a strong emphasis for sector-specific energy efficiency which may have an important implication not only on economic growth but also on environmental sustainability. Policy measures promoting clean energy transformation and better institutional setup also need to be highly encouraged.
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