Do market-induced factors stimulate environmental sustainability? A panel evidence from 25 African economies

We examine the relationships between market-induced factors and greenhouse gas (GHG) emissions. Our contribution applies three decades of data from 25 African economies to a Panel-VECM to assess periodic shifts in GHG emissions, with financial development and renewable energy consumption as the cointegrating vectors. Countries were classified based on their use of hydropower relative to their industrial activities. Our empirical results indicate a long-run relationship between the cointegrating vectors, with financial development and renewable energy acting as stabilising factors in GHG emissions. The results reveal employment in industry, foreign direct investment (FDI), fossil fuel, and industrial performance, which Granger-cause GHG emissions. A rise in one unit of fossil fuel consumption and FDI causes an increase in GHG emissions by 69% and 24%, respectively. This consequence comes from economies with high industrial outputs and labour supply, which use more fossil fuel energy in their production. Following a rigorous normative analysis, we suggest an independent sustainable energy mix to complement the workforce employed and more investments to meet the UN’s sustainable development goals. These new findings and interpretations are particularly relevant for sustainable industrial growth in Africa, highlighting the importance of an advanced theoretical foundation for effective policy interventions. • Panel VECM evaluates the long-term stability and short-term shifts in GHG emissions • Financial development and renewable energy consumption are stabilising drivers • A unit increase in fossil fuel use leads to a 69% rise in GHG emissions in Africa • A unit increase in FDI leads to a 24% rise in GHG emissions in Africa • High industrial output countries use more fossil fuel and labour supply