N-shaped EKC in sub-Saharan Africa: the three-dimensional effects of governance indices and renewable energy consumption.

Abstract

The environment has been delivering ecological balance through mitigation and ultraviolet ray protection. Nevertheless, human interactions have been creating unfavorable changes on environmental quality. Accordingly, based on a panel data (1996-2018), this study inspected evidence for N-shaped EKC across 41 SSA countries classified under three income categories. By extending the EKC hypothesis and using the three-stage simultaneous equation modeling, the study also estimated the direct and indirect effects of the three governance indices on environmental quality in the region. Consequently, the study confirmed N-shaped EKC only in the upper middle-income SSA countries. Furthermore, in the lower-income SSA countries, while the institutional governance index has a direct negative effect on environmental degradation, government effectiveness has an indirect negative effect on GHG emissions through renewable energy consumption. In the lower-middle-income SSA countries, while economic governance has a direct positive effect, political and institutional governances have a direct negative effect on environmental degradation. Here, also, political stability and the absence of violence have an indirect negative effect on GHG emission through income. In the upper middle-income SSA countries, control of corruption and the regulatory quality of the government has an indirect negative effect on environmental quality through income and renewable energy consumption, respectively. The inconclusive effects of the three governance indices on environmental quality might be the result of income heterogeneity across the region. Thus, policy prescriptions based on understanding the heterogeneous effects of governance indices within the three income groups might help to prove environmental quality in the region.