Elsevier

Energy

Volume 39, Issue 1, March 2012, Pages 180-186
Energy

The impact of energy consumption and CO2 emission on the economic growth and financial development in the Sub Saharan African countries

https://doi.org/10.1016/j.energy.2012.01.032Get rights and content

Abstract

This study investigated the impact of energy consumption and CO2 emission on GDP (gross domestic product) growth and the financial development in thirty Sub Saharan African Countries. The panel model was used in this study from the period 1980 to 2008. The results showed that energy consumption had played an important role to increase both economic growth and the financial development in the investigated economies but with the consequence of high po llution. This study recommended that these countries should increase energy productivity by increasing energy efficiency, implementation of energy savings projects, energy conservation, and energy infrastructure outsourcing to achieve its financial development and GDP growth and to increase their investment on energy projects to achieve the full energy potential.

Highlights

► The impact of energy consumption, CO2 emission on GDP and the financial development in the SSA countries was investigated. ► The panel model was implied in this study from the period 1980 to 2008. ► The results show energy consumption increased economic growth and the financial development but with higher pollution.

Introduction

Sub Saharan African (SSA) contains countries that have the lowest gross domestic product in the world as well as the lowest economic and financial development. However, based on the World Economic Development (WED), the countries of this reign achieved improvements in growth in the 2000’s, managed to achieve high GDP (gross domestic product) growth by 5.08% in 2008, and the GDP per capita rose by 2.5%. Moreover, the energy consumption of this reign rose by 6% and CO2 emission increased by 20%. This point helps us to reach the main goal of this study which is to examine the impact of energy consumption on the economic growth and the financial development in the Sub Saharan African countries, namely, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo, Ethiopia, Gabon, Gambia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritius, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Swaziland, Togo, and Zambia.

Section snippets

Studies on energy consumption and GDP growth

The relationship between the energy consumption and GDP growth was the focus of research conducted by many researchers. Warr and Ayres [1] found one way causal relationship from energy consumption to economic growth in the US, in addition, no evidence of causal relationship from economic growth to energy consumption was found. Therefore, to sustain long run growth, it is important to increase either energy suppliers or the efficiency of energy usage. While Fallahi [2] found a strong

Studies on energy consumption, CO2 emission, and GDP growth

A large number of studies found the existence of a causal relationship between energy consumption, CO2 emission and economic growth such as China by Chang [11]. Similar results were found in Turkey by Halicioglu [12] who also found that the income had a more significant impact in explaining the CO2 emission in Turkey than the energy consumption. Pao and Tsai [13] found similar results in Brazil. Lean and Smyth [14] found a causal relationship running from electricity consumption and CO2

Studies on energy consumption, CO2, and the financial development

Another number of studies examined the relationship between energy consumption and the financial development which plays an important role in achieving high economic growth Shumpeter [26], Goldsmith [27], McKinnon [28] and Shaw [29]. Jalil and Feridun [30] found that the increase in the financial development decreases environmental pollution. Similar results were found by Tamazian et al. [31] in the BRIC countries, however, Zhang [32] found that the financial development increases CO2 emission

Methodology

The panel model will be implemented taking the period 1980–2008. Three models will be built in this study; the GDP per capita model as an indicator of economic growth, the broad money model and private credit to the private sector as indicators of the financial development. During the period 1980–2008, the countries under investigation had managed to increase their financial development, GDP growth, total energy consumption, and CO2 emission (World Development Indicators). Thus, the motivation

Empirical results and discussion

Table 4 reviews the unit root test results and clearly shows that the variables are not stationary at levels. However, we found that the variables are stationary at the first difference rejecting the null hypothesis indicating that the variables contain a panel unit root.

Conclusion

This study investigated the impact of the energy consumption and CO2 emission on the GDP growth and the financial development in thirty Sub Saharan African economies, namely Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo, Ethiopia, Gabon, Gambia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritius, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Swaziland, Togo, and Zambia. The panel model was used

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