Greening the environment: do climate-related development finances and renewable energy consumption matter? An African tale

Abstract

With the rise in global food insecurity, pollution, and wildlife extinction caused by climate change, development policies are now tailored toward addressing this quagmire. However, the unresolved question is, are climate-related development finances effective in greening the environment in developing countries? In this milieu, this study assessed the effectiveness of climate-related development finances and renewable energy consumption on CO2 emissions in Africa by applying the system Generalized Method of Moments (GMM) estimation technique on data from 2000 to 2020 for 41 selected countries. The findings show that the overall climate-related development finances, adaptation-related development finances, and mitigation-related development finances have short-run carbon-enhancing and long-run carbon-reducing effects in Africa. Similarly, renewable energy consumption and the net inflows of foreign direct investment have short-run worsening and long-run carbon-abatement effects in Africa. In contrast, higher GDP per capita, urbanization, and higher energy intensity are effective in reducing CO2 emissions in Africa only in the short run, however, they exacerbate CO2 emissions in Africa over the long run. In this light, the study underscores the need to invest heavily in climate-related development projects, and green technology innovation and production in Africa. The results also suggest the need to upgrade the current energy structure in Africa to renewable energy sources for a greener, cleaner, and brighter Africa. However, these policy perspectives require enough funds for effective implementation. Hence, the study calls on the developed countries (the polluters) to support Africa with the required funds to pay off climate debt by 2030 and build climate-resilient practices.