Elsevier

Energy Policy

Volume 163, April 2022, 112829
Energy Policy

Are abundant energy resources and Chinese business a solution to environmental prosperity in Africa?

https://doi.org/10.1016/j.enpol.2022.112829Get rights and content

Highlights

  • The relationship between energy resource, investment and the environment.

  • Energy resources positively related to the environmental quality.

  • Investment and trade are negatively related to the environmental quality.

  • Formulate and enforcing regulations against non-environmentally friendly.

Abstract

Africa is abundantly endowed with oil and mineral resources and investment (Habiyaremye, 2020; Zakari and Khan, 2021). However, the region has failed to transform this ample advantage for environmental prosperity. This study centers on the influence of energy resources, Chinese investment, and trade in Africa on the environmental quality of the 40 SSA countries. To achieve this objective, we applied Panel Driscoll-Kraay Standard Errors (PDSE) and System-Generalized Method of Moment (S-GMM) estimators for yearly data spanning the period of 1992–2018. The empirical finding demonstrates that there is a positive relationship between energy resources and environmental degradation. This suggests that energy resources cannot help improve the environmental degradation in Africa. However, we find a negative relationship between Chinese investment, trade, and environmental degradation, indicating that Chinese investment and trade are associated with improving environmental quality. In the light of this, we strongly advise that the SSA states should direct their foreign business to China. With that, environmental-friendly technologies can be obtained to cut down environmental pollution. However, the government should formulate and enforce regulations against non-environmentally friendly energy resources systems capable of damaging the environment.

Introduction

African countries are faced with the challenge of striking a balance between economic responsibilities and maintaining a healthy environment. While bilateral business is on the rise, African economies search for support to grow their economies (Adisu et al., 2010). However, the unhealthy environment of the energy-intensive business in the developed world has melted exploitation and pollution in developing economies via the transfer of energy-intensive products (Essandoh et al., 2020). Moreover, the discriminating exploration of energy from oil, gas, and coal further aggravates the lingering environmental degradation in the African region. The question that is begging for an answer now is: to what extent energy resource exploration and foreign business have crippled the quality of the environment in SSA countries?

To answer this, we examine the literature on the factors determining the quality of the environment. For instance, Flores and Brouwer (2018), Wang et al. (2020b), Acheampong (2018), Zakari et al. (2021a) and Wu et al. (2020) believe that energy is one source from which the environmental quality is being threatened due to its ability to release carbon dioxide emissions into the air. While Marques and Caetano (2020), Acharyya (2009), Ren et al. (2014), Huang et al. (2019), and Fauzel (2017) gave credit to FDI for playing an indirect role to improve the environment. Likewise, trading on environmental technologies is also a factor that may mitigate the rise in carbon emissions (Xu et al., 2020; Du et al., 2020; Essandoh et al., 2020). Therefore, it is understood that energy, FDI, and trade are associated with the environment. Given this fact, we raise the following points:

Firstly, Africa's economies are vulnerable to environmental degradation because of their interaction with natural resources. The vast scores of energy production in SSA countries are generated from natural resources such as oil, gas, and coal, which are highly pollution intensive. Therefore, we approach this study from electricity production (i.e., oil, gas, and coal) as our proxy for energy resources, shifting from the traditional energy consumption as seen in the previous studies (Flores and Brouwer, 2018; Wang et al., 2020b; Acheampong, 2018; Wu et al., 2020). We argue that energy consumption in SSA countries is mainly regarded as the end product, which holds little or zero carbon emission. Hence, the most appropriate choice among the variables is electricity production (i.e., oil, gas, and coal). This captures the actual energy-related emissions as reflected in Fig. 1, which show South Africa and Nigeria as leading countries with higher carbon dioxide emissions in the region.

Secondly, unlike the previous studies (Marques and Caetano, 2020; Acharyya, 2009; Ren et al., 2014; Huang et al., 2019; Xu et al., 2020; Du et al., 2020; Essandoh et al., 2020), who used global FDI and trade openness, we argued that global FDI and trade might not reflect the true nature of the African economy due to substantial Chinese investment and trade in SSA economies. Thus, showing the importance of Chinese investment and trade in Africa. Hence, this study opted for Chinese FDI and trade to reflect on China's strong bilateral business relationship with the SSA countries. Fig. 2, Fig. 3 reflect that South Africa, Nigeria, Zambia, Zimbabwe, and Angola are China's top five partners with FDI. In contrast, Angola is on the top of the trading partner list with China in the region, followed by South Africa and Nigeria.

Given the above assertions, we applied panel Driscoll-Kraay standard errors and system generalized method of moment estimators for a panel of 40 SSA economies from 1992 to 2018. Firstly, our main analysis shows that the energy resources in SSA economies are pollution-intensive; this implies that energy resources exploration is associated with increasing carbon emissions and, consequently, environmental degradation. This is not far-fetched from the fact that these states solely depend on non-renewable energy sources such as oil, gas, and coal, which are tagged as highly carbon-intensive. Secondly, the analysis also shows that the surge in carbon emissions can be subjected to downturns if engaged in foreign business with China. In other words, the Chinese investment and trade in SSA economies have helped to reduce carbon emissions, thereby promoting environmental quality. One possible reason for these successes is the transference of environmental technologies and less polluted products to the region. We concluded by taking the robust analysis, and the S-GMM estimation proved robust to our main analysis.

Our study makes improved contributions and shows significant differences from the previous literature on energy and environment (Flores and Brouwer, 2018; Wang et al., 2020b; Acheampong, 2018; and Wu et al., 2020). Firstly, we provide evidence to support that energy resources damage the environment without focusing on the traditional variables of energy used as captured in the previous studies. Secondly, we applied electricity production (i.e., oil, gas, and coal), which captured the exploration of energy from oil, gas, and coal. With this data, we captured the overall energy-related carbon emissions.

Thirdly, we provide real-term foreign business (i.e., Chinese investment and trade) impact on the environment, which the government and policymakers can use to make informed decisions on the environment, unlike the previous studies that focus on the global FDI and trade. The finding from the global FDI and trade cannot be used to draw policies for African economies because it has more business engagement with China than any other country in the world. Fourthly, we control for autocorrelation, heteroskedasticity, and CD, unlike previous studies (Flores and Brouwer, 2018; Wang et al., 2020b; Acheampong, 2018) and Wu et al. (2020) that applied econometric techniques that do not control for autocorrelation, heteroskedasticity, and CD.

The remaining sections are literature review in section 2, section 3 is the data, model specification, and methodology, while sections 4 Results and discussion, 5 Conclusion and policy implication are results, discussion, conclusion, and policy implications.

Section snippets

Energy resources and the environment

Energy resources have become part of our daily living due to their significant contribution to our survival as individuals and organizations (Wu et al., 2021, Zhou et al., 2021). Given the enormous impact of energy resources, government, policymakers, and academicians have developed their interest in it. For instance, Flores and Brouwer (2018) and Bekun et al. (2021a & d) argued that the environment is better maintained using renewable energy gas. Renewable energy gas will reduce carbon

Data

This section presents the data that analyse the association between energy resources, Chinese investment and trade in Africa, and environmental performance. The current study opted for yearly data spanning the period 1992 through the year 2014 for the 40 African economies. Thus, making the study dependable with 920 observations (i.e., n = 40, t = 23) because the Chinese –African business records came to the lime line in 1992. We also transformed all our variables to natural logarithms except

Pre-regression analysis

Table 2 presents descriptive statistics, and the results show that environmental quality is as higher as 15368.835mtc among the selected countries, suggesting an average of 9.8691mtc (15368.835 (environmental quality)/15572689(population)) per head. On the other hand, these forty countries have an average of 9.8691mtc being emitted yearly per citizen. The energy resource (24.69) is relatively small, compared to the Chinese business ($113.055) and trade ($937.113), respectively. This indicates

Conclusion

A very negligible number of studies have explored the impact of energy resources on environmental performance. To add to the literature volume and fill this gap, the current research examines the role of energy resources on environmental performance by accounting for Chinese investment and trade in Africa. To do this, we explore the effects of Chinese FDI and trade in Africa on environmental performance using second-generation panel data methods.

By our main findings from panel Driscoll-Kraay

CRediT authorship contribution statement

Abdulrasheed Zakari: Writing – original draft, Conceptualization, Methodology, modeling, Software. Guo Li: Conceptualization, Writing – review & editing. Irfan Khan: Supervision, Writing – review & editing. Abhinav Jindal: Writing – review & editing, Proofreading and reviewing. Vincent Tawiah: Writing – review & editing. Rafael Alvarado: Proofreading.

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgements

The authors sincerely thank the editors and anonymous reviewers for their constructive comments and suggestions. This research is partially supported by the National Natural Science Foundation of China under the grant nos. 71971027, 91746110 and 71521002; Beijing Philosophy and Social Science Foundation under the grant no.19JDGLB017; the Special Items Fund of Beijing Municipal Commission of Education.

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