EFFECT OF GREEN INVESTMENTS ON CARBON REDUCTION IN SUB-SAHARAN AFRICA
Abstract
The Sub-Sahara Africa (SSA) is bedeviled with extreme environmental-related problems ranging from deforestation, pollution, to erosion among others. In the region, carbon emission remains one of the critical challenges both governments and policy makers have to contend with. This has led the SSA countries to embark on green projects to combat these problems, especially carbon-dioxide emission (CO2E). However, the extent to which these green projects have led to reduction in CO2E remains a puzzle. Empirical evidence is yet to reach a consensus on the effect of green investments on CO2E in the SSA. Therefore, this study investigated the effect of green investment on CO2E in order ascertain whether the former reduced the latter between 2011 and 2023
The research employed descriptive statistics, correlation, Augmented Dickey Fuller (ADF) stationarity test and Autoregressive Distributed Lag (ARDL) to analyze the effect of four green investment variables, namely, green bond issues (GRBD), renewable energy investment (REIV), environmental facility fund (EFCF) and renewable agricultural and water investments (RAWI) on CO2E. Furthermore, it used the Granger causality to ascertain whether green investment variables and CO2E have significant causal relationship or not.
The results of analysis carried out indicated that in the short run, GRBD significantly reduced CO2E (coefficient = -80.427843, p-value = 0.0086), while REIV and EFCF exhibited positive but insignificant effects. RAWI have negative but insignificant effect. In the long run, GRBD still exerted a negative and significant impact on CO2E (coefficient = -165.8188, p-value = 0.0010). REIV showed a significant reducing effect on CO2E while EFCF (coefficient = -143835.7, p-value = 0.0038) and RAWI displayed negative but insignificant effect.. Finally, the Granger causality test results indicated no significant causal relationships between the green investment and CO2E.
The study concluded that green investment significantly reduced CO2E during the study years but no significant causality (predictive) effect on CO2E. It therefore recommended that stakeholders should enhance the implementation and monitoring mechanisms for green bond projects, promote and incentivize renewable energy investments, develop targeted programmes to improve the effectiveness of renewable agricultural and water investments allocate greater resources to environmental facility funds and foster cross-sectoral collaboration and capacity-building initiatives in Sub-Sahara Africa
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