Sectoral value chains and environmental pollution in Africa: can development policies target digitalization and structural transformation to enhance environmental governance?

ABSTRACT Enhancing the environmental governance in developing countries is now part of development plans in mitigating climate change effects on economies. This study analyses the effect of the sectoral value chains participation on environmental pollution and assesses whether digitalization and structural transformation can be used as key instruments in improving environmental quality in Africa. We use second-generation panel data for 40 African countries from 1990 to 2019. The results show that deepening the agriculture, industry and services sectors’ value chains participation increases the environmental pollution in Africa. We find that the U-inverted hypothesis between value chain participation and environmental pollution is verified in all considered sectors. This result implies that the environmental governance in Africa should consider the specificity of each sector of the economy. Moreover, digitalization and structural transformation enhance the environmental quality in sectoral value chain participation in Africa since they significantly reduce CO2 emissions. Fossil fuel energy consumption is a driver of CO2 emissions, while renewable energy consumption reduces environmental pollution in Africa. These findings have important policy implications in terms of the environmental governance in sectoral value chain participation for climate change mitigation in developing countries, including Africa.