Fossil fuel consumption and total factor productivity in East Africa: Evidence from panel data (2000–2023)

While previous research studies have focused on economic growth, the impact of fossil fuel consumption on total factor productivity (TFP) remains underexplored, particularly in East Africa. This paper therefore examines the impact of fossil fuel consumption on TFP in East African countries between 2000 and 2023. The study employed the pooled mean group (PMG) estimator within a panel ARDL framework to distinguish short-run dynamics from long-run equilibrium relationships. The findings revealed a nonlinear diminishing relationship between fossil fuel consumption and productivity, as indicated by the negative and statistically significant squared term of fossil fuel consumption (−0.084, p < 0.01), while the linear effect was positive but not statistically significant. These findings suggest that increasing dependence on fossil fuels is associated with declining marginal productivity effects in the long run. Generally, the results highlight the importance of prioritizing energy efficiency, technological innovation, and institutional capacity to ensure that energy use contributes to sustainable long-run productivity.