Consumption-based carbon emission and foreign direct investment in oil-producing Sub-Sahara African countries: the role of natural resources and urbanization

Abstract

The intensification of international trade movements and economic interconnectivity has far-reaching implications for many macroeconomic indicators, not to mention ecological consequences. To this end, this analysis examines the dynamic interaction between foreign direct investment (FDI), natural resources, economic advancement, and urbanization on consumption-based carbon emission which is adjusted to global trade for oil-producing Sub-Saharan Africa countries. The time frame for this analysis is from 1990 to 2018. To examine the nature of relationship between the outlined variables, a balanced panel econometric analysis alongside augmented mean group (AMG), common correlated effect mean group (CCEMG), and the Driscoll-Kraay(DK) OLS techniques while the system-GMM was utilized for robustness purposes. The outcomes reveal that income increases consumption-based carbon emission within the range of 0.668 to 1.1333%; natural resources also increase consumption-based carbon emission within the range of 0.0159 to 0.2304%; FDI on the other hand increases consumption-based carbon emission around 0.0156 to 0.186%, while urbanization increases consumption-based carbon emission within the range of 0.0231 to 0.6176% in the long run. Thus, there is a positive relationship between consumption-based carbon emission and all the understudied variables within the oil-producing Sub-Sahara Africa countries thereby affirming the pollutant haven hypothesis for the countries on the premises that foreign direct investment inflow has a detrimental influence on the receiving economies alongside natural resource. Hence, the outcomes suggest the need to pursue low-carbon strategies for a cleaner and friendly environment.