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Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa

Simplice Asongu () and Nicholas Odhiambo ()

No 20/072, Working Papers of the African Governance and Development Institute. from African Governance and Development Institute.

Abstract: This research focuses on assessing how improving openness influences CO2 emissions in Sub-Saharan Africa. It is based on 49 countries in SSA for the period 2000-2018 divided into: (i) 44 countries in SSA for the period 2000-2012; and (ii) 49 countries for the period 2006-2018. Openness is measured in terms of trade and foreign direct investment (FDI) inflows. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, enhancing trade openness has a net positive impact on CO2 emissions, while increasing FDI has a net negative impact. Second, the relationship between CO2 emissions and trade is a Kuznets shape, while the nexus between CO2 emissions and FDI inflows is a U-shape. Third, a minimum trade openness (imports plus exports) threshold of 100 (% of GDP) and 200 (% of GDP) is beneficial in promoting a green economy for the first and second sample, respectively. Fourth, FDI is beneficial for the green economy below critical masses of 28.571 of Net FDI inflows (% of GDP) and 33.333 of net FDI inflows (% of GDP) for first and second samples, respectively. It follows from findings that while FDI can be effectively managed to reduce CO2 emissions, this may not be the case with trade openness because the corresponding thresholds for trade openness are closer to the maximum limit. This study complements the extant literature by providing critical masses of Trade and FDI that are relevant in promoting the green economy in Sub-Saharan Africa.

Keywords: CO2 emissions; Economic development; Africa; Sustainable development (search for similar items in EconPapers)
JEL-codes: C52 O38 O40 O55 P37 (search for similar items in EconPapers)
Pages: 26
Date: 2020-01
New Economics Papers: this item is included in nep-env and nep-int
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Forthcoming: International Journal of Energy Sector Management

Downloads: (external link)
http://www.afridev.org/RePEc/agd/agd-wpaper/Trade- ... -a-Green-Economy.pdf Revised version, 2020 (application/pdf)

Related works:
Working Paper: Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa (2020) Downloads
Working Paper: Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa (2020) Downloads
Working Paper: Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa (2020) Downloads
Working Paper: Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa (2020) Downloads
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