Globalization and economic complexity in the implementation of carbon neutrality in Africa's largest economies

Abstract

Climate change and global warming are expected to increase due to significant carbon dioxide (CO2) emissions. In this context, countries worldwide undertake strategies to combat CO2 emissions and obtain a carbon neutrality objective. The present study analyzed carbon neutrality objectives for the ten largest economies in Africa, spanning 1990 to 2018. This research also investigated the influence of globalization and economic complexity on carbon neutrality objectives. The study applied the Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Fixed Effect model for its analysis. The research indicated that economic complexity and economic growth (GDP) positively impact CO2 emission, which adversely affects the carbon neutrality objective. However, financial development, globalization, population, and renewable energy consumption are efficient for attaining carbon neutrality objectives; the pairwise Granger causality results in bidirectional causality between economic growth, population, and CO2 emissions. Unidirectional causality runs from the CO2 emissions to renewable energy, globalization, and economic complexity. Specifically, the FMOLS statistics suggest that a percent rise in economic complexity and economic growth increases CO2 emissions by 82.1% and 25.5%. In contrast, a unit increase in financial development, globalization, population, and renewable energy consumption leads to a decline in CO2 emissions by 21.7%, 48.4%, 18.5%, and 3.1%. Empirical evidence offers policy implications that would enable the largest economies in Africa to accomplish the carbon neutrality objective by adjusting the policies in addressing economic growth and economic complexity. Also, adequate attention should be devoted to globalization adaptability.