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Climbing the green ladder in Sub-Saharan Africa: dynamics of financial development, green energy, and load capacity factor

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Abstract

With its critical role in tackling environmental degradation, advancing economic development, and cultivating a more sustainable and equitable future, green energy (GE) consumption is closely linked with several Sustainable Development Goals. This study explores the simultaneous effects of GE and decomposed financial development (FD) on environmental quality (EQ) proxied by load capacity factor (LCF) and carbon dioxide (CO2) emissions using a dynamic panel of 47 economies from 1990 to 2021. The two-stage System Generalized Methods of Moment (GMM) technique was used to estimate the interactions among variables. The study finds that both financial institutions (FI) and financial markets (FM) development have verifiable positive effects on LCF, thus, improving the environment. However, EQ is compromised (increased CO2 emissions) when FI and FM develop in Africa. Furthermore, this study reveals that whereas GE has a detrimental effect on the environment (reducing LCF), it reduces CO2 emissions (thus, improving EQ). FI development stimulates the harmful effect of GE on the environment by reducing LCF significantly. FM development significantly and positively moderates the GE and LCF nexus by increasing EQ in Africa. Interestingly, both FI and FM developments negatively moderate the GE and CO2 nexus. This implies that EQ improves as FI and FM interact with GE in the region all other things being equal. This study has relevant implications for environmental, financial, and economic policies in Africa to decarbonize and achieve the sustainable development goals. Relevant policy recommendations that can direct these nations’ policies towards guaranteeing ecological stability are made in light of these empirical findings.

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Fig. 1

Source: PWC—Africa Energy Review Report, 2022

Fig. 2

Source: PWC—Africa Energy Review Report, 2022

Fig. 3

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Data availability

The raw data supporting the conclusions of this article will be made available by the authors upon request.

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Funding

This work was financially supported by the Research Unit on Governance, Competitiveness, and Public Policies (UIDB/04058/2020) + (UIDP/04058/2020), funded by national funds through FCT—Fundação para a Ciência e a Tecnologia.

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Authors and Affiliations

  1. Research Unit on Governance, Competitiveness and Public Policies (GOVCOPP), University of Aveiro, Aveiro, Portugal

    Louis David Junior Annor, Margarita Robaina & Elisabete Vieira

  2. Department of Economics, Management, Industrial Engineering and Tourism, University of Aveiro, Aveiro, Portugal

    Louis David Junior Annor & Margarita Robaina

  3. Department of Accounting, Banking and Finance, Ghana Communication Technology University, Accra, Ghana

    Louis David Junior Annor

  4. Higher Institute of Accounting and Administration of University of Aveiro, University of Aveiro, Aveiro, Portugal

    Elisabete Vieira

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Louis David Junior Annor designed the study and wrote the initial draft. Margarita Robaina and Elisabete Vieira supervised the study and revised the manuscript. All (Louis David Junior Annor, Margarita Robaina, and Elisabete Vieira) authors designed the analytical tools and contributed substantially to finalizing the manuscript. All authors contributed to the article and approved the submitted version for publication.

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Correspondence to Louis David Junior Annor.

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Appendix 1: List of SSA economies used in the study.

Appendix 1: List of SSA economies used in the study.

Mauritius, Algeria, Egypt, Gabon, Libya, South Africa, Tunisia, Botswana, Cote D'Ivoire, Cameroon, Congo, Comoros, Cape Verde, Ghana, Equ. Guinea, Kenya, Morocco, Mauritania, Namibia, Sao Tome, Zambia, Eswatini, Burundi, Benin, Burkina Faso, Central Africa, Congo DR, Ethiopia, Guinea, Gambia, Guinea Bissau, Lesotho, Madagascar, Mali, Mozambique, Malawi, Niger, Nigeria, Rwanda, Sudan, Senegal, Sierra Leone, Chad, Togo, Tanzania, Uganda, and Angola

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Annor, L.D.J., Robaina, M. & Vieira, E. Climbing the green ladder in Sub-Saharan Africa: dynamics of financial development, green energy, and load capacity factor. Environ Syst Decis (2024). https://doi.org/10.1007/s10669-023-09959-2

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