Energy Use Efficiency in Kenya's Cement Industry

Abstract

The current study sought to quantify energy efficiency in Kenya’s cement subsector and identify different factors that explain energy efficiency variations across firms. The study adopted a production-theoretic approach to efficiency measurement. Data Envelopment Analysis and Tobit regression analysis were the analytical tools employed in the study. Firm-level data from three firms Bamburi Cement Limited, Athi River Mining, and East African Portland Cement Company for the period 2004-2014 was used to measure energy use efficiency and to estimate the effect of various factors on energy efficiency scores. Empirical results from the DEA model established that these firms could improve their level of energy use efficiency, though the scope for improving energy use efficiency varied across different firms. The Tobit regression revealed that only quality of the labour force had a positive and significant effect on energy efficiency score. The findings of this study are significant to policy makers in charge of promoting energy efficiency on the demand side. Energy audits, for instance, could be conducted for the inefficient firms to identify possible areas where they can improve efficiency in energy use.