Synthesizing the role of urbanization and oil prices in achieving carbon neutrality in Africa: do financial crisis and renewable energy play a role?

Abstract

Higher oil prices can incentivize urban planners to adopt energy-saving behaviors, such as using public transportation or investing in energy-efficient appliances, which can help achieve carbon neutrality. Notwithstanding this, empirical studies ignored the role played by oil prices in the urbanization-carbon emissions nexus. Therefore, this study aims to examine the moderating role of oil prices on the urbanization-CO2 emission relationship, along with renewable energy consumption and the global financial crisis. Using Driscoll-Kraay and IV-GMM techniques on panel data from 35 African countries, the results confirmed an inverted U-shaped relationship between urbanization and CO2 emissions in Africa, which is consistent with the ecological modernization theory. The results also show that oil prices, financial crisis, and renewable energy contribute to reducing carbon emissions, while the EKC hypothesis curve between GDP and CO2 emissions is validated. Additionally, urbanization has a favorable oil price effect on carbon emissions in Africa. The heterogeneity analysis validates the EKC curve between urbanization and CO2 emissions in low- and high-emission countries, while oil prices and financial crisis mitigate CO2 emissions only in low-emission countries. Further, oil prices moderate urbanization to reduce carbon emissions in low- and high-emission countries. The findings also indicated that renewable energy mitigates carbon emissions and that the inverted U-shape is confirmed in low- and high-emission countries. These results suggest that policymakers should put more effort into the adoption of renewable energy and the use of energy-saving technologies in urban development to achieve carbon neutrality.