Modelling the Nexus between Financial Development, FDI, and CO 2 Emission: Does Institutional Quality Matter?

Festus Fatai Adedoyin (), Festus Bekun, Kayode Kolawole Eluwole and Samuel Adams
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Festus Fatai Adedoyin: Department of Computing and Informatics, Bournemouth University, Bournemouth BH12 5BB, UK
Kayode Kolawole Eluwole: Department of Gastronomy and Culinary Arts, Gelisim University, Istanbul 34310, Turkey
Samuel Adams: Ghana Institute of Management and Public Administration, GIMPA School of Public Service and Governance, Achimota, Accra P.O. Box AH 50, Ghana

Energies, 2022, vol. 15, issue 20, 1-17

Abstract: The present study draws motivation from the United Nations Sustainable Development Goals, with a special focus on SDGs 7 and 13, which highlight the need for access to clean and affordable energy in an environment devoid of emissions; it addresses climate change mitigation in the context of Sub-Saharan Africa. To this end, a carbon-income function setting for Sub-Saharan Africa (SSA) is constructed. The dynamic relationship between financial development and climate change is evaluated using three indicators and foreign direct investment and carbon dioxide emissions (CO 2 ), while accounting for regulatory institutional quality using a “generalized method of a moment” estimation technique that addresses both heterogeneous cross-sectional issues. Empirical results obtained showed a positive statistical relationship between economic growth and CO 2 emissions in SSA at the <0.01 significance level. This suggests that, in SSA, the economic growth path is pollutant emissions driven. This indicates that SSA is still at the scale phase of her growth trajectory. However, an important finding from the present study is that regulatory institutional indicators, such as political stability, government effectiveness, control of corruption, and voice and accountability, all exert a negative effect on CO 2 emissions. This implies that regulatory measures militate against emissions in SSA. Based on the empirical findings of this study, it can be concluded that clean FDI inflows assist in ameliorating emissions. Thus, the need for a paradigm shift to cleaner technologies, such as renewables, that are more eco-friendly, is encouraged in Sub-Saharan Africa, as the current study demonstrates the mitigating role of renewable energy consumption on CO 2 emissions. Further policy prescriptions are presented in the concluding section.

Keywords: clean technologies; financial development; pollutant emission; renewable energy consumption; Sub-Saharan Africa (SSA) (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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