The role of natural resources rent, energy efficiency and governance in reducing pollution – New evidence with MMQR method

Abstract

The question on whether natural resources are a curse or not remain with no satisfactory answer. There are two opposing school of thoughts on the role of natural resources rent in fostering sustainable development, that is, the natural resource curse and Rostow's hypothesis. The study uses the data of the 15 natural resources-rich African countries, for the period ranging from 1990 to 2021. The Methods of Moments Quantile Regression with fixed effects, a contemporary method that gives heterogeneous results across quantiles is employed to ensure robust outcomes. Cross-sectional dependence, dynamics and heterogeneity are catered for in the model. The major results presented in this research shows that the rule of law is fundamental in reducing pollution. Energy efficiency and the use of renewable energy resources is also observed to strongly lower the emission of carbon. Most importantly, the study results depict that natural resources rent exacerbates carbon emission; hence, supporting the postulations of the resources curse hypothesis that natural resources are counter-productive. We also show that economic growth, along with non-renewable energy worsens pollution. The major policies presented in this research are to promote renewable energy use, rule of law and efficient use of energy to attain sustainable development. This research bridges the gap in the literature by examining the effects of natural resources rent on carbon emission, a study that has not been widely covered. The present research also brings the importance of governance in reducing pollution in the natural resources-rich African countries.