Macroeconomic Influencing Factors on Co2 Emissions in Rwanda: Short-Run Dynamics and Long-Run Equilibrium

Abstract

This research aims to study the determinants of the emission of carbon dioxide in Rwanda during the period 1990–2022, considering foreign direct investment, gross domestic product, the industrial sector, and the consumption of renewable energies as explanatory variables. The ARDL model was used to test the short- and long-term relationship between variables, The results of the study concluded that all independent variables have a negative impact on the emission of carbon dioxide in the long term, while in the short term, the results found a positive impact of both foreign investment, domestic output and composite industries on the emission of carbon dioxide in Rwanda, while the industrial sector and the consumption of renewable energies have a negative impact. The results also concluded that GDP is the largest contributor to the emission of carbon dioxide in Rwanda compared to the impact of other variables. This indicates that the rapid growth rates recorded by Rwanda have negatively affected the emission of CO2, as the increase in GDP in Rwanda requires the use of energy, and some energies eventually generate carbon dioxide emissions. The study recommended the need to promote the use of renewable energy and reduce dependence on fossil fuels, in addition to improving energy efficiency in all economic sectors such as the use of bicycles and electric vehicles. The study encourages foreign and domestic investments in clean and environmentally friendly technologies and expands investment in research and development to discover alternative energy sources that maintain high productivity and low levels of CO2 emissions. It also proposes carbon taxes to incentivize companies to reduce their footprint.