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The Role of Fiscal Decentralization in Limiting CO2 Emissions in South Africa

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Abstract

Fiscal decentralization determines government behavior considerably by being a major factor influencing South Africa’s carbon emissions. We analyze the impact of fiscal decentralization on carbon emissions on the basis of the dataset of South Africa for the period 1960 to 2020. Using the novel dynamic ARDL simulations model, we reveal that fiscal decentralization has a CO2 emissions reduction impact in both the short and long run, highlighting the presence of the race to the top approach. The findings suggest that, in order to maintain South Africa’s ecological sustainability, further fiscal decentralization should be undertaken through further devolution of power to local entities, particularly in terms of environmental policy issues. In an effort to fulfill the energy-saving functions of fiscal expenditures, South Africa should also establish policies to improve environmental sustainability by strengthening a lower layer of government and clarifying responsibilities at the national and local levels.

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Data Availability

The data relevant to this research are publicly available from the World Development Indicators or obtained from the authors by making a reasonable request.

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Funding

This work is based on the research supported in part by the National Research Foundation of South Africa (Grant Number: PSTD2203311300).

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Authors and Affiliations

  1. Department of Economics, School of Economics, University of Pretoria, Hatfield Campus, Private Bag X20, Hatfield, 0028, South Africa

    Maxwell Chukwudi Udeagha & Marthinus Christoffel Breitenbach

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  1. Maxwell Chukwudi Udeagha
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  2. Marthinus Christoffel Breitenbach
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Contributions

MCU and MCB conceptualized the study idea, drafted the paper, collected data, analyzed data, wrote the introduction section, organized the literature review, drafted the methodology section, interpreted the results, and provided the discussions, concluded the study with policy implications, and organized the reference list.

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Correspondence to Maxwell Chukwudi Udeagha.

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Appendix

Appendix

See Figs. 9, 10, Tables 10, 11.

Fig. 9
figure 9

Plot of cumulative sum of recursive residuals (CUSUM)

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Fig. 10
figure 10

Plot of cumulative sum of squares of recursive residuals (CUSUMSQ)

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Table 10 Gregory–Hansen test of cointegration with regime shifts: model: change in level.
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Table 11 Dynamic ARDL simulations analysis controlling for structural break.
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Udeagha, M.C., Breitenbach, M.C. The Role of Fiscal Decentralization in Limiting CO2 Emissions in South Africa. Biophys Econ Sust 8, 5 (2023). https://doi.org/10.1007/s41247-023-00112-w

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