Structural Change, Financial Development, and Carbon Dioxide Emissions: Does Evidence Support EKC for Sub-Sahara Africa?

Authors

1 Department of Economics, KolaDaisi University, Ibadan, Nigeria; Center for Economic Policy and Development Research (CEPDeR), Covenant University, Canaanland, Ota, Ogun State, Nigeria

2 Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria

3 Department of Banking and Finance, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria

4 Department of Economics, University of Lagos, Akoka, Lagos State, Nigeria

Abstract

There are clear signs of climate change in Africa, on the contrary, the continent has limited economic and financial muscle to generate clean, low-carbon, greener, and energy-efficient production activities needed to improve environmental quality. Hence, this paper examines the impact of structural change and financial development on carbon dioxide emissions and tests whether the EKC hypothesis is supported for 31 sampled Sub-Saharan African countries between 1990 and 2017. The study utilizes the pooled mean group heterogeneous panel data. The study finds that the EKC exists for all income groups. The deterministic role of financial development is observed for low and lower-middle-income countries, while the influential role of financial development was obtained for upper-middle and high-income countries. Structural change, industrialization, and agriculture increase the level of CO2 in upper-middle and high, lower-middle, and low-income countries, respectively. To minimize climate change in Africa, there is a need to invest in energy-efficient industrialization and agricultural practices, which could be achieved through targeted financial support.

Keywords

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Iranian Economic Review
Volume 25, Issue 3
September 2021
Pages 437-451

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