Simultaneous Determination of the Relationship between Economic Growth, Energy Consumption, Trade and the Environment in West Africa

Abstract

Energy plays important roles in human lives and economic growth. Energy use however,  have  its  environmental  impacts.  Economic  growth  may  also  be achieved through international trade and this can also impact the environment by increasing energy consumption and consequently, pollution. To this end, this study  examined  the  interrelatedness  of  energy  consumption,  environmental pollution, international trade and the economic growth in nine of the West African countries from 1990 to 2018 using the method of two stage least squares (2SLS). The study found contrary to expectation, that economic growth and international trade have no significant impact on carbon dioxide emissions in West Africa. Foreign Direct Investment (FDI) and Financial Development (FD) have no significant impact on carbon dioxide emission in West Africa. Trade openness significantly increased emission in the West African countries. Energy consumption, in  conformity  with  economic  theory  has  positively  contributed significantly  to  the  rise  in  carbon  emission  in  West  African  states.  Trade openness significantly increases economic growth. Other results indicate that economic growth bears no significant influence on energy consumption. This is a  benefit  rather  than  a  problem  as  de-linking  energy  consumption  from economic growth is a good objective of any government. Urbanization significantly increased energy consumption in West Africa. Lastly, foreign direct investment, significantly contributed positively to trade growth in West Africa. This study recommends a switch to more renewable and clean sources of energy as opposed to the fossil-based energy sources in order to de-link energy demand from emissions in their countries. Governments can also encourage the development and use of energy efficient technology or enact energy conservation policies so as to reduce fossil - fuels use among others.