Examining the link between carbon emission, carbon emission intensity and financial development in Nigeria. A Dynamic ARDL Simulation

Abstract

The need for adequate and consistent policies to mitigate the continuous rise of carbon emission have motivated the energy economist in the past decades to actively involved and explore common economic agents that are driving the rising pattern in the environmental pollution. This study is positioned towards contributing to the on-going debates on this issue by exploring the impact of bank credit to the private sector on aggregate carbon emissions and carbon emission intensity in Nigeria over the period 1971– 2016 using dynamic ARDL simulations. Controlling for the influence of fossil energy intensity of consumption and economic globalization, the study found that bank credit to the private sector has a positive significant long-run increasing effect on aggregate CO2 emission and carbon emission intensity in the economy. Second, the estimated coefficients show that fossil energy intensity of consumption and economic globalization have a significant long-run and short-run increasing impact on aggregate CO2 emission and carbon emission intensity in the economy. In contrast, the population has a significant long-run and short-run reducing effect on aggregate CO2 emission and only the long run reducing effect on carbon emission intensity. Third, economic growth has significant short-run and increasing long-run effects on aggregate CO2 emission and a long run increasing effect on carbon emission intensity. In sum, the results show that the economy is yet to transient to renewable energy.