Skip to main content

Advertisement

SpringerLink
Log in

Carbon emission effect of renewable energy utilization, fiscal development, and foreign direct investment in South Africa

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

In recent times, the persistent global environmental challenges have paved the way for the underpinning of climate change within the perspective of financial performance. Given this motivation, the current study further examines the interaction of foreign direct investment, fiscal development, renewable energy usage, economic growth, and CO2 outrush of South Africa (1970 to 2014). The unit root test of Zivot-Andrews and augmented Dickey-Fuller (ADF), vector autoregressive (VAR), and Pesaran ARDL (autoregressive distributed lag bounds) approach were employed in the data analysis. The existence of a statistically significant correlation among the series was detected by the Johansen multivariate cointegration in long term and subsequently by the long run coefficient of the vector error correction model test result. Furthermore, in the long run, significant positive correlation existed among renewable energy, GDP (economic growth), development in finance (FD), and CO2 outrush. While in the short run, GDP and development in finance have a statistically positive correlation with outrush of CO2; renewable energy consumption exerts a negative relationship on CO2 in the short run. The Granger causality results show overall causality among the series; proof of bidirectional stimulus running from renewable energy to economic growth; foreign direct investment to trade; and also one causality direction running among the other variables. The policy twist is that the implementation of energy efficiency programs currently pursued by the South African government to enhance renewable energy consumption should be facilitated with more determination. In addition, the government and policymakers should thrive to align these energy efficiency programs with other macroeconomic and financial variables such as foreign direct investment (FDI), fiscal development, and trade openness to achieve minimum CO2 outrush level in South Africa, thus yielding environmental sustainability.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Data availability

Not applicable

References

  • Abidin ISZ, Haseeb M, Azam M, Islam R (2015) Foreign direct investment, financial development, international trade, and energy consumption: panel data evidence from selected ASEAN Countries. Int J Energy Econ Policy 5(3):841–850

    Google Scholar 

  • Ahmad F, Draz MU, Ozturk I, Su L, Rauf A (2020) Looking for asymmetries and nonlinearities: the nexus between renewable energy and environmental degradation in the Northwestern provinces of China. J Clean Prod 266:121714

    Article  Google Scholar 

  • Alola AA (2019a) Carbon emissions and the trilemma of trade policy, migration policy and health care in the US. Carbon Manag 10(2):209–218

    Article  CAS  Google Scholar 

  • Alola AA (2019b) The trilemma of trade, monetary and immigration policies in the United States: accounting for environmental sustainability. Sci Total Environ 658:260–267

    Article  CAS  Google Scholar 

  • Alola AA, Alola UV (2018) Agricultural land usage and tourism impact on renewable energy consumption among Coastline Mediterranean Countries. Energy Environ 29(8):1438–1454

    Article  Google Scholar 

  • Al-Mulali U, Ozturk I, Lean HH (2015) The influence of economic growth, urbanization, trade openness, financial development, and renewable energy on pollution in Europe. Nat Hazards 79(1):621–644

    Article  Google Scholar 

  • Auffhammer M, Carson RT (2008) Forecasting the path of China’s CO2 emissions using province-level information. J Environ Econ Manag 55(3):229–247

    Article  Google Scholar 

  • Azam M, Khan AQ, Abdullah HB, Qureshi ME (2016) The impact of CO 2 emissions on economic growth: evidence from selected higher CO 2 emissions economies. Environ Sci Pollut Res 23(7):6376–6389

    Article  CAS  Google Scholar 

  • Baloch MA, Ozturk I, Bekun FV, Khan D (2021) Modeling the dynamic linkage between financial development, energy innovation, and environmental quality: does globalization matter? Bus Strateg Environ 30(1):176–184

    Article  Google Scholar 

  • Balsalobre D, Álvarez A, Cantos JM (2015) Public budgets for energy RD&D and the effects on energy intensity and pollution levels. Environ Sci Pollut Res 22(7):4881–4892

    Article  Google Scholar 

  • Basu P, Chakraborty C, Reagle D (2003) Liberalization, FDI, and growth in developing countries: a panel cointegration approach. Econ Inq 41(3):510–516

    Article  Google Scholar 

  • Bekun FV, Alola AA, Sarkodie SA (2019) Toward a sustainable environment: Nexus between CO2 emissions, resource rent, renewable and non-renewable energy in 16-EU countries. Sci Total Environ 657:1023–1029

    Article  CAS  Google Scholar 

  • Belloumi M (2014) The relationship between trade, FDI and economic growth in Tunisia: an application of the autoregressive distributed lag model. Econ Syst 38(2):269–287

    Article  Google Scholar 

  • Bloch H, Rafiq S, Salim R (2012) Coal consumption, CO2 emission and economic growth in China: empirical evidence and policy responses. Energy Econ 34(2):518–528

    Article  Google Scholar 

  • Bora I, Kirikkaleli D, Zoaka J, Bekun F, Ekwueme D (2020) Investigating monetary policy dynamics in Nigeria: the role of private investment. Manag Sci Lett 10(1):247–254

    Article  Google Scholar 

  • Carkovic M., & Levine R (2005) Does foreign direct investment accelerate economic growth?. Does foreign direct investment promote development, 195.

  • Chen X, Shao S, Tian Z, Xie Z, Yin P (2017) Impacts of air pollution and its spatial spillover effect on public health based on China’s big data sample. J Clean Prod 142:915–925

    Article  CAS  Google Scholar 

  • Cowan WN, Chang T, Inglesi-Lotz R, Gupta R (2014) The nexus of electricity consumption, economic growth, and CO2 emissions in the BRICS countries. Energy Policy 66:359–368

    Article  Google Scholar 

  • Diallo A, & Masih M (2017) CO2 emissions and financial development: evidence from the United Arab Emirates-based on an ARDL approach. MPRA.

  • Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Journal of the Econometric Society, Econometrica, pp 1057–1072

    Google Scholar 

  • Ekwueme DC (2018) Assessing the impact of foreign direct investment (FDI) on the economic growth of Nigeria from 1979 to 2016. 4th International Students Social Sciences Congress Proceedings I, November 2018 249-267. https://www.ilem.org.tr/mediaf/uok4_kitap_1._cilt_WEB.pdf

  • Ekwueme DC, Zoaka JD (2020) Effusions of carbon dioxide in MENA countries: inference of financial development, trade receptivity, and energy utilization. Environ Sci Pollut Res 27(11):12449–12460

    Article  CAS  Google Scholar 

  • Enerdata (2019) Global energy statistical yearbook-2019 edition. https://www.enerdata.net/about-us/company-news/energy-statistical-yearbookupdated.html. Accessed 20 Sept 2020

  • Engle RF, Granger CW (1987) Co-integration and error correction: representation, estimation, and testing. Journal of the Econometric Society, Econometrica, pp 251–276

    Google Scholar 

  • Farhani S, Ozturk I (2015) Causal relationship between CO 2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia. Environ Sci Pollut Res 22(20):15663–15676

    Article  CAS  Google Scholar 

  • Granger CW (1988) Some recent development in a concept of causality. J Econ 39(1-2):199–211

    Article  Google Scholar 

  • Hansen H, Rand J (2006) On the causal links between FDI and growth in developing countries. World Econ 29(1):21–41

    Article  Google Scholar 

  • Herzer D, Klasen S (2008) In search of FDI-led growth in developing countries: the way forward. Econ Model 25(5):793–810

    Article  Google Scholar 

  • Hsiao FS, Hsiao MCW (2006) FDI, exports, and GDP in East and Southeast Asia— panel data versus time-series causality analyses. J Asian Econ 17(6):1082–1106

    Article  Google Scholar 

  • Huang L, Zhao X (2018) Impact of financial development on trade-embodied carbon dioxide emissions: evidence from 30 provinces in China. J Clean Prod 198:721–736

    Article  Google Scholar 

  • Iamsiraroj S, Ulubaşoğlu MA (2015) Foreign direct investment and economic growth: a real relationship or wishful thinking? Econ Model 51:200–213

    Article  Google Scholar 

  • Ike GN, Usman O, Alola AA, Sarkodie SA (2020) Environmental quality effects of income, energy prices and trade: the role of renewable energy consumption in G-7 countries. Sci Total Environ 721:137813

    Article  CAS  Google Scholar 

  • Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33(2):284–291

    Article  Google Scholar 

  • Ji X, Umar M, Ali S, Ali W, Tang K, & Khan Z (2020) Does fiscal decentralization and eco-innovation promote a sustainable environment? A case study of selected fiscally decentralized countries. Sustainable Development.

  • Jian J, Fan X, He P, Xiong H,  Shen H (2019) The effects of energy consumption, economic growth and financial development on CO2 emissions in China: A VECM approach. Sustainability 11(18):4850

  • Khan MA, Ozturk I (2020) Examining foreign direct investment and environmental pollution linkage in Asia. Environ Sci Pollut Res 27(7):7244–7255

    Article  CAS  Google Scholar 

  • Khan Z, Ali S, Dong K, Li RYM (2021) How does fiscal decentralization affect CO2 emissions? The roles of institutions and human capital. Energy Econ 94:105060

    Article  Google Scholar 

  • Kim SW, Lee K, Nam K (2010) The relationship between CO2 emissions and economic growth: the case of Korea with nonlinear evidence. Energy Policy 38(10):5938–5946

    Article  Google Scholar 

  • Kirikkaleli D, Adebayo TS (2020) Do renewable energy consumption and financial development matter for environmental sustainability? New global evidence. Sustain Dev

  • Kirikkaleli D, Adebayo TS, Khan Z, Ali S (2020) Does globalization matter for an ecological footprint in Turkey? Evidence from dual adjustment approach. Environ Sci Pollut Res:1–9

  • Kohler M (2013) CO2 Emissions, energy consumption, income, and foreign trade: a South African perspective, ERSA working paper no. In: 356, Cape Town. Africa, Economic Research South Africa (ERSA), South

    Google Scholar 

  • La Rovere EL, Grottera C, Wills W (2018) Overcoming the financial barrier to a low emission development strategy in Brazil. Int Econ 155:61–68

    Article  Google Scholar 

  • Lee JW (2013) The contribution of foreign direct investment to clean energy use, carbon emissions, and economic growth. Energy Policy 55:483–489

    Article  Google Scholar 

  • Leitão NC (2014) Economic growth, carbon dioxide emissions, renewable energy, and globalization. Int J Energy Econ Policy 4(3):391–399

    Google Scholar 

  • Leitão NC (2015) Energy consumption and foreign direct investment: a panel data analysis for Portugal. Int J Energy Econ Policy 5(1):138–147

    Google Scholar 

  • Liu G (2006) A causality analysis on GDP and air emissions in Norway (No. 447). Discussion Papers.

  • Mahmood H, Furqan M, Bagais O (2019) Environmental accounting of financial development and foreign investment: spatial analyses of East Asia. Sustainability 11(1):13

    Article  CAS  Google Scholar 

  • Makki SS, Somwaru A (2004) Impact of foreign direct investment and trade on economic growth: evidence from developing countries. Am J Agric Econ 86(3):795–801

    Article  Google Scholar 

  • Menyah K, Wolde-Rufael Y (2010) Energy consumption, pollutant emissions, and economic growth in South Africa. Energy Econ 32(6):1374–1382

    Article  Google Scholar 

  • Mohammed SMA, Guo P, Haq IU, Pan G, Khan A (2019) Do government expenditure and financial development impede environmental degradation in Venezuela? PLoS One 14(1):e0210255. https://doi.org/10.1371/journal.pone.0210255

    Article  CAS  Google Scholar 

  • Nosheen M (2013) Impact of foreign direct investment on gross domestic product. World Appl Sci J 24(10):1358–1361

    Google Scholar 

  • Omri A (2013) CO2 emissions, energy consumption and economic growth nexus in MENA countries: evidence from simultaneous equations models. Energy Econ 40:657–664

    Article  Google Scholar 

  • Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy, growth, openness, and financial development on carbon emissions in Turkey. Energy Econ 36:262–267

    Article  Google Scholar 

  • Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Econ 16(3):289–326

    Article  Google Scholar 

  • Pata UK (2018) Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: testing EKC hypothesis with structural breaks. J Clean Prod 187:770–779

    Article  Google Scholar 

  • Raheem ID, Tiwari AK, Balsalobre-Lorente D (2020) The role of ICT and financial development in CO2 emissions and economic growth. Environ Sci Pollut Res 27(2):1912–1922

  • Saboori B, Sulaiman J, Mohd S (2012) Economic growth and CO2 emissions in Malaysia: a cointegration analysis of the environmental Kuznets curve. Energy Policy 51:184–191

    Article  Google Scholar 

  • Saint Akadiri S, Alola AA, Akadiri AC, Alola UV (2019) Renewable energy consumption in EU-28 countries: policy toward pollution mitigation and economic sustainability. Energy Policy 132:803–810

    Article  Google Scholar 

  • Saint Akadiri S, Alola AA, Olasehinde-Williams G, Etokakpan MU (2020) The role of electricity consumption, globalization and economic growth in carbon dioxide emissions and its implications for environmental sustainability targets. Sci Total Environ 708:134653

    Article  CAS  Google Scholar 

  • Shahbaz M, Hye QMA, Tiwari AK, Leitao NC (2013) Economic growth, energy consumption, financial development, international trade, and CO2 emissions, in Indonesia. Renew Sust Energ Rev 36:262–267

    Google Scholar 

  • Siddique HMA (2017) Impact of financial development and energy consumption on CO2 emissions: evidence from Pakistan. Bull Bus Econ 6:68–73

    Google Scholar 

  • Siddique HMA, Majeed MT, Ahmad HK (2020) The impact of urbanization and energy consumption on CO2 emissions in South Asia. South Asian Stud 31(2):745–757

  • Sinha A, Sen S (2016) Atmospheric consequences of trade and human development: a case of BRIC countries. Atmos Pollut Res 7(6):980–989

    Article  Google Scholar 

  • Shahbaz M, Balsalobre-Lorente D, Sinha A (2019) Foreign direct Investment–CO2 emissions nexus in Middle East and North African countries: importance of biomass energy consumption. J Clean Prod 217:603–614

    Article  Google Scholar 

  • Tamazian A, Bhaskara Rao B (2010) Do economic, financial, and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Econ 32(1):137–145

    Article  Google Scholar 

  • Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy 37(1):246–253

  • Wang SS, Zhou DQ, Zhou P, Wang QW (2011) CO2 emissions, energy consumption and economic growth in China: a panel data analysis. Energy Policy 39(9):4870–4875

    Article  Google Scholar 

  • Xiong Y, Zhou J, Schauer JJ, Yu W, Hu Y (2017) Seasonal and spatial differences in source contributions to PM2. 5 in Wuhan, China. Sci Total Environ 577:155–165

  • Zhang L, Li Z, Kirikkaleli D, Adebayo TS, Adeshola I, Akinsola GD (2021) Modeling CO 2 emissions in Malaysia: an application of Maki cointegration and wavelet coherence tests. Environ Sci Pollut Res:1–15

  • Zivot E, Andrews DWK (2002) Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. J Bus Econ Stat 20(1):25–44

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Eastern Mediterranean University, Via Mersin-10, KKTC, Şehitkamil, Turkey

    Daberechı Chıkezıe Ekwueme & Joshua Dzankar Zoaka

  2. Department of Economics and Finance, Faculty of Economics, Administrative and Social Science, Istanbul Gelisim University, Istanbul, Turkey

    Andrew Adewale Alola

Authors
  1. Daberechı Chıkezıe Ekwueme
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Joshua Dzankar Zoaka
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Andrew Adewale Alola
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

Andrew Adewale ALOLA: Formal analysis, investigation, methodology, and corresponding.

Daberechı Chıkezıe EKWUEME: Writing—original draft, data curation, and analysis, review.

Joshua Dzankar ZOAKA: Conceptualization.

Corresponding author

Correspondence to Andrew Adewale Alola.

Ethics declarations

Ethical approval

Not applicable

Consent to participate

Not applicable

Consent to publish

Not applicable

Competing interests

The authors declare no competing interests.

Additional information

Responsible Editor: Ilhan Ozturk

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ekwueme, D.C., Zoaka, J.D. & Alola, A.A. Carbon emission effect of renewable energy utilization, fiscal development, and foreign direct investment in South Africa. Environ Sci Pollut Res 28, 41821–41833 (2021). https://doi.org/10.1007/s11356-021-13510-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-021-13510-8

Keywords

Search

Navigation