Do globalization and renewable energy contribute to carbon emissions mitigation in Sub-Saharan Africa?

Abstract

This study examines the impact of globalisation (measured in terms of foreign direct investment and trade openness), and renewable energy on carbon emissions using 46 sub-Saharan African countries for the period 1980-2015. Using fixed and random effect estimation techniques, the study found that renewable energy and foreign direct investment contribute to the reduction of carbon emissions while trade openness deteriorates the environment. It was also found that population growth and financial development contribute to the increase in carbon emissions. The study found evidence for Environmental Kuznets curve hypothesis. Our results revealed that institutional quality measured using regulation has a less pronounced effect for reducing carbon emissions. However, regulation moderates economic growth and foreign direct investment to reduce carbon emissions. These results are robust to alternative estimators such as the instrumental variable generalised method of moment and dynamic fixed effect estimators. The study further demonstrated that there are variations in the results among the regions within sub-Saharan Africa. The policy implications of the paper are discussed.

Keywords: Carbon emissions; FDI; Regulation; Renewable energy; Trade.