Energy Utilization, Financial Sector Development, Economic Growth, and Carbon Emissions in West Africa

Abstract

In this paper, we explored the influence of energy utilization, financial sector development, and economic growth on carbon emissions in West Africa. The study utilized panel data covering the periods 1995–2014 and 1995–2022 for some variables due to the availability of data for twelve (12) West African countries. The study was based on the framework of the Environmental Kuznets Curve (EKC) hypothesis. The data analysis follows the cointegrating regression analysis under the fully modified ordinary least squares (FMOLS) approach. The findings of the study indicate that the EKC hypothesis is valid within the West African region. Further, financial development and energy utilization were observed to exert a positive and significant effect on carbon emissions in West Africa. The interactive models also indicated that both the interaction of financial development and economic growth, as well as the interaction of financial development with energy utilization, exerted a positive and significant effect on carbon emissions in West Africa. Given these findings, the study concluded that the financial sector in the West African region seldom gives the eco-friendliness of the investments they are making a thorough consideration, and financial institutions in West African nations are motivated by profit and, as such, only lend money quickly for short-term investments, which may be inappropriate for promoting green investment.