Economic Growth, Governance and CO2 Emissions in West Africa

Abstract

Despite being the regions with the least levels of carbon emissions in the world, African countries are facing unique challenges on climate change, increased carbon emission levels and the need for environmental governance improvement. This study, therefore, examined the implications of economic growth and governance on CO2 emissions in West Africa. Specifically, the study investigated the role of governance in moderating the effect of economic growth on CO2 emissions in West Africa. The study utilized data for 16 West African countries from 2000 to 2020 in an unbalanced panel data framework. Empirical analyses were conducted using the Instrumental Variable Fixed Effects estimator with Driscoll and Kraay Standard Errors, as well as the Instrumental Variable Quantile Regression in order to account for serial correlation, endogeneity and conditional heteroskedasticity. The following conclusions were drawn from the results. First, economic growth significantly increases CO2 emissions in the region with the Environmental Kuznet Curve hypothesis present. Second, the quantile regression estimates reveal that the effect of economic growth on CO2 emissions is higher in countries where the initial level of carbon emissions is considerably high. Third, the results further show that in the presence of improved governance quality, economic growth does not significantly influence CO2 emissions in the region. Fourth, political stability and regulatory quality were the only indicators of governance that significantly impacted environmental pollution in the region. Finally, we found that other factors such as trade, urbanization, and renewable energy also significantly influenced CO2 emissions in the region. The study concludes by highlighting the importance of governance in moderating the effect of economic growth on CO2 emissions, as well as the importance of heterogeneous analysis for understanding the dynamism in economic relationships.