Carbon dioxide emissions, energy consumption, economic growth, and foreign direct investment: Causality analysis for Sub-Saharan Africa

• The study examines cointegration relationship between CO2 (carbon dioxide) emissions, energy consumption, economic development and FDI (foreign direct investment).
• We examine Granger causality analysis between the stated variables.
• There is evidence of cointegration among the variables in all the countries.
• GDP, energy consumption, FDI Granger cause CO2 emissions.
• FDI appear to increase CO2 emissions (evidence of pollution haven hypothesis).

This study investigates the causal links between CO2 (carbon dioxide) emissions, energy consumption, economic development and FDI (foreign direct investment) in six Sub Saharan African countries: the Republic of the Congo, the DRC (Democratic Republic of the Congo), Kenya, South Africa, Zambia and Zimbabwe. The results based on an autoregressive distributed lag model imply that the variables move together in the long run (cointegration) in all of the countries. The results also support the environmental Kuznets curve hypothesis in the cases of DRC, Kenya and Zimbabwe. Moreover, FDI appears to increase CO2 emissions in some of the countries, while the opposite impact can be observed in others. The most common unidirectional Granger causality relationships run from the other variables to CO2 emissions, with different variables Granger causing CO2 emissions in different countries, and from GDP (gross domestic product) to FDI. Granger causality running to CO2 emissions appears more likely in the countries where the evidence supports the environmental Kuznets curve hypothesis. Otherwise, the causality relationships vary greatly between the countries, making it impossible to give any universal policy recommendations.