Environmental impacts of macroeconomic indicators in the economic community of West African States

Abstract

Since the post-World War II period, the world’s per capita income has continued to rise except from 2006 until 2008 due to the global financial crisis. Coincidently, there is increasing concern about the environmental cost associated with increased global economic expansion as global temperatures scale-up and climate change become visible. Against this backdrop, this research intended to examine the relationship between economic growth and environmental degradation and other macroeconomic and social indicators in the Economic Community of West African States (ECOWAS) region. The motivations for this research stem from the fact that countries worldwide struggle to achieve sustainable development goals (SDGs), of which fighting climate change and reducing environmental degradation are among the focus. According to UNESCO and ECOWAS Commission (2019) reports, the West African region has been identified as the most prone to climate change and environmental degradation in the world. Therefore, research such as this one would go a long way in providing a guide for policy formulation to address environmental threats and climate change in the region that receives little attention from previous empirical studies. To achieve the objectives of this study, panel data spanning from 1970 until 2019 is used, and panel quantile regression that provides robust estimates were compared to the traditional Ordinary Least Square (OLS) estimations. The empirical findings revealed that a U-shaped relationship exists between economic growth and environmental degradation. In the long run, the findings implied that sustaining economic growth would increase environmental degradation in the region and it is not supported by the environmental Kuznets curve hypothesis. Also, population explosion and energy poverty are inimical to environmental quality. However, FDI inflows play a significant role in reducing environmental degradation, which contrasts with the pollution-haven hypothesis. Similarly, human capital development supports a clean environment in the region. From this study, policy implications for promoting literacy on the environment and paramount research and development (R&D) on a clean environment would increase environmental awareness. In addition, relying on economic growth alone would not address the menace of environmental degradation unless population explosion and energy poverty issues are equally addressed.