Sectoral growth and carbon dioxide emission in Africa: can renewable energy mitigate the effect?

Abstract

Owing to increased energy consumption, the growth of various sectors of economies has the tendency to increase carbon dioxide emissions, a major component of greenhouse gases that causes climate change and global warming. A suggested panacea is to increase the development and usage of renewable energy which is cleaner and emits less carbon dioxide. In this study the carbon dioxide emission effect of growth in the agricultural sector, industrial sector, and service sector is assessed. It goes on to analyse the moderation role of renewable energy in the sectoral growth-carbon dioxide emissions nexus. Using data from 32 African countries for the period 2002–2021, the study finds that expansion in agricultural sector, industrial sector and service sector exerts upward pressure on carbon dioxide emissions for the region while renewable energy reduces carbon emissions. Furthermore, renewable energy interacts with the agricultural and industrial sectors to reduce their impact on carbon emissions while the opposite is observed for the service sector. Other findings are that trade openness, urbanization and income increase carbon dioxide emissions. The study recommends the need to remove financial impediments that constrain firms operating in the various sectors of African economies. This will enhance their acquisition of efficient technologies for operations in order to reduce carbon dioxide emissions. Also, governments in the region should increase financial support for the development and adoption of renewable energy. Incentives should be introduced to “lure” firms to adopt renewable energy. Imposition of a heavy tax on firms in the service sector whose operations cause higher emission may help ensure the sector becomes environmentally friendly.