Toward a sustainable development in sub-Saharan Africa: do economic complexity and renewable energy improve environmental quality?

Abstract

Emission reduction has become more crucial for environmental sustainability in light of the growing concerns about climate change. Many studies have identified that structural change and clean energy technologies improve environmental quality. However, there is an absence of empirics that focus on the sub-Saharan Africa (SSA) context, which shifted the structure of their economies from the agriculture sector towards sophisticated manufacturing activities that affect the environment. Hence, this study aims to investigate the impacts of economic complexity and renewable energy consumption on carbon emissions in 41 SSA countries between 1999 and 2018. The study adopts contemporary heterogeneous panel approaches to overcome heterogeneity and cross-sectional dependence issues that usually arise in panel data estimates. The empirical findings of the pooled mean group (PMG) cointegration analysis indicate that renewable energy consumption alleviates environmental pollution in the long run and short run. In contrast, economic complexity improves environmental quality in the long run but not in the short run. On the other hand, economic growth contributes adversely to environmental degradation in the long run and short run. The study indicates that urbanization worsens environmental pollution in the long run. In addition, the outcomes of the Dumitrescu-Hurlin panel causality test indicate a unidirectional causal path from carbon emissions to renewable energy consumption. The causality results also suggest that carbon emission has bidirectional causation with economic complexity, economic growth, and urbanization. Therefore, the study recommends that SSA countries change their economic structure towards knowledge-intensive production and adopt policies that encourage investment in renewable energy infrastructures by subsidizing the initiatives to achieve clean energy technologies.