Carbon Emissions, Renewable Energy Consumption, Trade and Financial Development Linkages in SADC Countries: Evidence from a Nonlinear ARDL Analysis

Abstract

This study analyzes the relationship among carbon emissions, renewable energy consumption, trade openness, and financial development. To achieve this objective, the annual data of eleven SADC countries were used, spanning 1990 to 2022, depending on their availability. A descriptive statistic is presented, followed by unit root tests. Then, the NARDL method was applied to investigate the co-integration relationship between series. Several findings have been obtained. In the long-term, a positive shock on renewable energy consumption reduces CO2 emissions in Lesotho, Madagascar, Mozambique, South Africa, Tanzania, and Zimbabwe, except for the Seychelles. A positive change in trade openness also decreases CO2 emissions only in Tanzania and increases them in Eswatini and Mozambique. In the case of financial development, positive shocks increase carbon dioxide emissions in Tanzania. A negative shock on renewable energy use also decreases CO2 emissions in many countries namely, Comoros, Lesotho, Madagascar, Mauritius, Mozambique, and Tanzania. The same shock on trade openness reduces CO2 emissions in South Africa and adversely increases them in Mauritius and Tanzania. Negative changes in financial development also have a mixed effect. On the one hand, it contributes to reducing carbon emissions in Tanzania and Zimbabwe, and on the other hand, it promotes atmospheric pollution in Madagascar, Mauritius, Mozambique, and the Seychelles. Short-term dynamics have also been investigated. Policy implications have been proposed.