The Relationship Between Carbon Emissions and Economy Growth in Sierra Leone

This study explores the dynamic relationship between carbon emissions and economic growth in Sierra Leone—a developing West African country striving to balance development and environmental sustainability. The analysis incorporates foreign direct investment (FDI), energy consumption (EC), and trade openness (TO) as key explanatory variables, reflecting the country’s resource-dependent economy. Using the Autoregressive Distributed Lag (ARDL) model and time-series data from 1980 to 2021, the study examines both short- and long-term relationships. Stationarity of variables is confirmed via the Augmented Dickey-Fuller test, validating the model's reliability. Findings reveal a long-run co-integrating relationship among CO₂ emissions, economic growth, FDI, EC, and TO. Granger causality tests indicate a unidirectional causality from FDI to CO₂ emissions, suggesting that foreign investment—especially in energy-intensive sectors—plays a pivotal role in shaping environmental outcomes. Variance decomposition further shows that energy consumption is the most significant driver of emissions, followed by economic growth, with trade openness having a moderate effect. Policy recommendations emphasize aligning FDI with green practices, promoting low-carbon technologies, and transitioning to renewable energy sources like solar, hydro, and wind. Strengthening environmental regulations and offering incentives for sustainable business practices are also advised. This research provides critical insights for policymakers to pursue strategies that foster economic growth while minimizing environmental degradation.