Dynamic Analysis of Energy Consumption and Environmental Impact on GDP in Sub-Saharan Africa

Abstract

This study aims to explore the interrelationship between energy consumption, CO2 emissions, and GDP for Sub-Saharan African countries from 2000 to 2019. To effectively address this complex issue, a dynamic simultaneous-equation model is employed. The empirical findings reveal several key interdependencies. Firstly, there is a bidirectional causal relationship between energy consumption and economic growth, indicating that not only does increased energy consumption drive economic growth, but economic growth also leads to higher energy consumption. Moreover, the results demonstrate a bidirectional relationship between energy consumption and electricity consumption. This suggests that energy consumption influences electricity usage, and vice versa, reflecting the integral role of electricity in the overall energy framework of these countries. However, the study also finds that an increase in pollutant variables negatively impacts electricity consumption. This negative relationship indicates that higher levels of pollution may hinder the efficiency or availability of electricity, possibly due to regulatory measures or the adverse effects of pollution on power generation infrastructure. Additionally, the analysis confirms that economic growth and CO2 emissions are interlinked in a bidirectional manner. As economic activities expand, CO2 emissions rise due to increased industrial activity, transportation, and energy consumption. Conversely, higher levels of CO2 emissions can affect economic growth, potentially through the impacts of environmental degradation and regulatory constraints aimed at controlling emissions. The findings underscore the intricate balance between fostering economic growth and managing environmental impacts in Sub-Saharan Africa. The bidirectional relationship between energy consumption and economic growth suggests that policies promoting energy efficiency and sustainable energy sources could support economic development without exacerbating environmental issues. Similarly, the link between economic growth and CO2 emissions highlights the need for integrating environmental considerations into economic planning and development strategies. To mitigate the negative impacts of pollutants on electricity consumption and overall energy efficiency, Sub-Saharan countries could benefit from investing in cleaner energy technologies and infrastructure improvements. This could include expanding renewable energy sources, such as solar and wind power, which are abundant in the region. Additionally, enhancing the regulatory framework to promote energy efficiency and reduce emissions can help balance economic growth with environmental sustainability.