Circular economy and carbon emissions: threshold effect of quality of governance

Abstract

PurposeThe main objective of the quantitative study is to ascertain the relationship between the circular economy (CE) and carbon emissions. And also, the study examines the threshold beyond which the quality of governance reduces carbon emissions.Design/methodology/approachThe autoregressive distributed lag approach is employed for the econometrics analysis. The study employed quarterly data from 2006Q1 to 2017Q4 on Ghana.FindingsThe results indicated that, although the CE had a positive and significant effect on carbon emissions, the moderating term had an adverse and significant effect on carbon emissions. This result suggests that to mitigate carbon emissions, a robust and efficient quality of institutions should be sustained. Finally, the study also identified a quality of governance threshold of 1.155 beyond which a shift to a CE would result in a reduction in carbon emissions.Research limitations/implicationsThe study recommends that policymakers should initiate policies that would enhance quality governance.Originality/valueThe main contributions of the study are that the paper ascertained the threshold beyond which quality of governance assists circular economic practices to mitigate carbon emissions. Also, the study revealed that quality of governance is a catalyst to promote circular economic practices in reducing carbon emissions. Finally, the study ascertains the long-run effect of the variables of interest on carbon emissions.