Testing the nexus between renewable energy consumption and environmental quality in Nigeria: The role of broad‐based financial development

Abstract

This study investigates the nexus between renewable energy consumption and environmental quality in Nigeria, accounting for the role of financial development, and reexamines the validity of the environmental Kuznet curve (EKC) hypothesis for Nigeria covering the period 1990 to 2016. To cover financial development more adequately, the current study uses the broad-based financial development index constructed by the International Monetary Fund. The study employs second generation econometric approaches of Lee and Strazicich, and Bayer and Hanck combined cointegration tests to check for stationarity and cointegration among the variables, and then applies autoregressive distributed lag (ARDL) and vector error correction model (VECM) Granger causality tests to explore the effect and causal relationship respectively. The results divulge that renewable energy consumption improves environmental quality, while financial development hurts the environment. Further, the results validate an inverted U-shaped association between economic growth and environmental degradation in Nigeria. The VECM Granger causality results indicate a long-run effect of the independent variables on CO 2 emission, while the short-run causality reveals a mixture of unidirectional and bidirectional causality among the variables. This study therefore recommends that policy makers consider the important roles of renewable energy and financial development in reforming energy policies to achieve environmental sustainability. K E Y W O R D S environmental quality, financial development, renewable Energy 1 | INTRODUCTION Environmental concerns have become prominent among economists and environmental experts in both developed and developing countries. These concerns which center on environmental sustainability are brought about by both natural factors and human (anthropogenic) activities of economic expansion. The prevailing global expert opinion is that expansion in economic activities is largely dependent on energy, given its central role in facilitating

Modeling the Effects of Agricultural Innovation and Biocapacity on Carbon Dioxide Emissions in an Agrarian-Based Economy: Evidence From the Dynamic ARDL Simulations

“…Therefore, the validity of the EKC hypothesis in this study is consistent with previous studies such as Galeotti et al, (2006), Shahbaz et al (2013), Shahbaz et al (2017), Usman et al (2019Usman et al ( , 2020, Agboola and Bekun (2019), Ike (2020aIke ( , 2020bIke ( , 2020c, Iorember et al (2020). The effect of agricultural innovation on CO 2 emissions is positive, inelastic, and statistically significant both in the long run and short run.…”

Breaking the carbon curse: The role of financial development in facilitating low‐carbon and sustainable development in Algeria

“…So far, recent empirical studies on the impact of financial development on CO 2 emissions have presented mixed results. For example, Gill et al (2019), Gokmenoglu et al (2021), Nwani (2021), and Nwani and Omoke (2020) show that financial development reduces CO 2 emissions in Malaysia, Turkey, Venezuela, and Brazil, respectively, while Ibrahiem (2020), Iorember et al (2020), Khan et al (2021), and Shahbaz et al (2020) show it increases CO 2 emissions in Egypt, Nigeria, Pakistan, and the United Arab Emirates, respectively. Despite the growing interest on the topic, empirical evidence within the context of the Algeria economy is still scarce and lacking to the best of our knowledge.…”

“…Financial development stimulates economic activities in the private sector through increased access to credit, promotion of trade and investment flows and enhancement of research and development (R&D) in technological activities (see Levine, 2005). This has been the theoretical background for explaining the interaction between financial development and environmental quality indicators in recent studies (see Iorember et al, 2020; Saud et al, 2019). It is expected that the incorporation of financial development into environmental protection policies would create enabling trade and investment environment required to increase investment in cleaner energy technologies.…”

L'accès à l’électricité: une solution pour réduire la déforestation en Afrique?

“…Selon la logique de la CEK, au début du processus d'industrialisation et de développement, les dommages environnementaux vont augmenter suite à l'utilisation intensive des ressources naturelles et de technologies de production polluantes. Cependant, après un certain niveau d'expansion économique, le développement va se traduire par l'utilisation de technologies plus propres et une valeur plus importante accordée à la qualité environnementale, ce qui entraîne moins de pollution et de déforestation (Ben Jebli, Ben Youssef, & Ozturk, 2015; Choumert, Motel, & Dakpo, 2013; Chowdhury & Moran, 2012; Culas, 2012; Iorember, Goshit, & Dabwor, 2020). Si la CEK a été obtenue pour des indices environnementaux relatifs à la qualité de l'air ou à la qualité de l'eau (Grossman & Krueger, 1995; Selden & Song, 1994; Shafik, 1994).…”