Simultaneous Determination of the Relationship between Economic Growth, Energy Consumption, Trade and the Environment in West Africa

Abstract

Energy plays important roles in human lives and economic growth. Energy use however, have its environmental impacts. Economic growth may also be
 achieved through international trade and this can also impact the environment
 by increasing energy consumption and consequently, pollution. To this end, this study examined the interrelatedness of energy consumption, environmental
 pollution, international trade and the economic growth in nine of the West
 African countries from 1990 to 2018 using the method of two stage least squares (2SLS). The study found contrary to expectation, that economic growth and international trade have no significant impact on carbon dioxide emissions in West Africa. Foreign Direct Investment (FDI) and Financial Development (FD) have no significant impact on carbon dioxide emission in West Africa. Trade openness significantly increased emission in the West African countries. Energy consumption, in conformity with economic theory has positively contributed significantly to the rise in carbon emission in West African states. Trade openness significantly increases economic growth. Other results indicate that economic growth bears no significant influence on energy consumption. This is a benefit rather than a problem as de-linking energy consumption from economic growth is a good objective of any government. Urbanization significantly increased energy consumption in West Africa. Lastly, foreign direct investment, significantly contributed positively to trade growth in West Africa. This study recommends a switch to more renewable and clean sources of energy as opposed to the fossil-based energy sources in order to de-link energy demand from emissions in their countries. Governments can also encourage the development and use of energy efficient technology or enact energy conservation policies so as to reduce fossil - fuels use among others.