How crucial are natural resources in descending environmental degradation in Ghana? A novel dynamic ARDL simulation approach

Abstract

Natural resources are abundant worldwide and function as economy stabilizers in almost every nation. However, mishandling these natural resources and their excessive exploitation degrades the environment. This has sparked scholarly interest in investigating the relationship between natural resources and environmental degradation and proposing measures to safeguard the ecosystem. Despite these efforts, research on this interaction in Ghana is limited. This paper fills the knowledge gap by exploring the short and long-run relationships between natural resources and environmental degradation in Ghana from 1990 to 2020 while employing renewable energy consumption, economic growth, trade openness, and industrialization as additional parameters. Robust econometric approaches are engaged for precise and reliable results, revealing that all the study variables are stationary at their first difference and co-integrated in the long run. Thus, the novel dynamic ARDL simulation estimator is adopted to examine the short and long-run connections between the study parameters. The results demonstrate that increased natural resources, economic growth, and trade openness escalate environmental degradation in the short and long run. However, an increase in renewable energy consumption is found to reduce environmental degradation in the short and long run. Further, industrialization accelerates environmental degradation in the short run but diminishes it in the long run. Finally, it is recommended that Ghana adopts sustainable development approaches to achieve a harmonious balance between economic growth and environmental protection, effectively addressing challenges of environmental degradation, meeting Sustainable Development Goals (SDGs), and promoting equitable natural resource management.