Coal Consumption and Environmental Sustainability in South Africa: The role of Financial Development and Globalization

Tomiwa Sunday Adebayo, Dervis Kirikkaleli, Ibrahim Adeshola, Dokun Oluwajana, Gbenga Daniel Akinsola, Oseyenbhin Sunday Osemeahon


DOI: https://doi.org/10.14710/ijred.2021.34982

Abstract


This paper aims to investigate coal consumption and environmental sustainability in South Africa by examining the role of financial development and globalization by using a dataset covering the period from 1980 to 2017. The study utilized the Auto-regressive Distributed Lag Model (ARDL) approach in addition to the Bayer and Hank combined co-integration, fully modified Ordinary least squares (FMOLS), and Dynamic ordinary least Squares (DOLS). The study further utilized the frequency domain causality test to capture the causal linkage between the series. The advantage of the frequency domain causality is that it can capture causal linkages between series at different periods. The Bayer and Hanck co-integration and ARDL bounds tests reveal co-integration among the series. The empirical findings based on the ARDL long-run estimation reveal that a 1% increase in coal consumption increases environmental degradation by 1.077%, while a 1% increase in financial development decreases the environmental degradation by 0.973%. Furthermore, a 1% increase in economic growth decreases environmental quality by 1.449%. The outcomes of the FMOLS and DOLS approaches also provide supportive evidence for the ARDL long-run results. Furthermore, the results of the frequency domain causality test reveal that at a significance level of 1%, coal consumption Granger causes CO2 emissions at different frequencies, while financial development Granger causes CO2 emissions in the long run and short run at a significance level of 10%. In terms of policy suggestions, South Africa should embrace policies that encourage energy consumers to shift toward renewable energy. Furthermore, financial reforms should be implemented to curb environmental degradation


Keywords


CO2 Emissions; Coal Consumption; Financial Development; Globalization; South-Africa

Full Text:

PDF

References


Abdullah, W. M. Z. B. W., Zainudin, W. N. R. A., Ishak, W. W. B. M., Sulong, F., & Zia Ul-Haq, H. M. (2021). Public Participation of Renewable Energy (PPRED) Model in Malaysia: An Instrument Development. Int. J. Ren. Energ. Dev., 10(1), 119-137. https://doi.org/10.14710/ijred.2021.32311

Adebayo, T. S., & Odugbesan, J. A. (2020). Modeling CO 2 emissions in South Africa: empirical evidence from ARDL based bounds and wavelet coherence techniques. Environ. Sci. Pollut. Res., 1-13. https://doi.org/10.1007/s11356-020-11442-3

Adebayo, T. S. (2020). Revisiting the EKC hypothesis in an emerging market: an application of ARDL-based bounds and wavelet coherence approaches. SN App. Sci., 2(12), 1-15. https://doi.org/10.1007/s42452-020-03705-y

Adebayo, T.S. (2021). Do CO2 emissions, energy consumption and globalization promote economic growth? Empirical evidence from Japan. Environ Sci Pollut Res., 34-28. https://doi.org/10.1007/s11356-021-12495-8 https://doi.org/10.1007/s11356-021-12495-8

Adebayo, T., Akinsola, G., Odugbesan, J., Olanrewaju, V. (2021). Determinants of Environmental Degradation in Thailand: Empirical Evidence from ARDL and Wavelet Coherence Approaches. Pollut., 7(1), 181-196. doi: 10.22059/poll.2020.309083.885

Adedoyin, F. F., Gumede, M. I., Bekun, F. V., Etokakpan, M. U., & Balsalobre-lorente, D. (2020). Modelling coal rent, economic growth and CO2 emissions: Does regulatory quality matter in BRICS economies?. Sci. Tot. Environ., 710, 136284. https://doi.org/10.1016/j.scitotenv.2019.136284

Al-mulali, U., & Che Sab, C. N. B. (2018). The impact of coal consumption and CO2 emission on economic growth. En. Sour., Part B: Econ., Plann., and Pol., 13(4), 218-223. https://doi.org/10.1080/15567249.2012.661027

Akinsola, G. D., & Adebayo, T. S. (2021) Investigating the Causal Linkage Among Economic Growth, Energy Consumption and CO 2 Emissions in Thailand: An Application of the Wavelet Coherence Approach. Int. J. Ren. Energ. Dev., 10(1). https://doi.org/10.14710/ijred.2021.32233

Alola, A. A., Yalçiner, K., Alola, U. V., & Saint Akadiri, S. (2019). The role of renewable energy, immigration and real income in environmental sustainability target. Evidence from Europe largest states. Sci. Tot. Environ., 674, 307-315. https://doi.org/10.1016/j.scitotenv.2019.04.163

Attiaoui, I., Toumi, H., Ammouri, B., & Gargouri, I. (2017). Causality links among renewable energy consumption, CO2 emissions, and economic growth in Africa: Evidence from a panel ARDL-PMG approach. Environ. Sci. Pollut. Res., 24(14), 13036-13048. https://doi.org/10.1007/s11356-017-8850-7

Awosusi, A. A., & Adeshola, I., & Adebayo, T. S. (2020). Determinants of CO2 Emissions in Emerging Markets: An Empirical Evidence from MINT Economies. Int. J. Ren. Energ. Dev., 9(3). https://doi.org/10.14710/ijred.2020.31321

Bayer, C., & Hanck, C. (2013). Combining non‐cointegration tests. J. of Tim. Ser. Anal., 34(1), 83-95. https://doi.org/10.1111/j.1467-9892.2012.00814.x

Bekun, F. V., Emir, F., & Sarkodie, S. A. (2019). Another look at the relationship between energy consumption, carbon dioxide emissions, and economic growth in South Africa. Sci. Tot. Environ., 655, 759-765. https://doi.org/10.1016/j.scitotenv.2018.11.271

Belaid, F., & Youssef, M. (2017). Environmental degradation, renewable and non-renewable electricity consumption, and economic growth: Assessing the evidence from Algeria. Energ. Pol., 102, 277-287. https://doi.org/10.1016/j.enpol.2016.12.012

Bento, J. P. C., & Moutinho, V. (2016). CO2 emissions, non-renewable and renewable electricity production, economic growth, and international trade in Italy. Ren. Sustain. Energ. Rev., 55, 142-155. https://doi.org/10.1016/j.rser.2015.10.151

Bildirici, E. M., & Bakirtas, T. (2016). The relationship among oil and coal consumption, carbon dioxide emissions, and economic growth in BRICTS countries. J. of Ren. and Sustain. Energ., 8(4), 045903. https://doi.org/10.1063/1.4955090

Charfeddine L, Kahia M (2019) Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: a panel vector autoregressive (PVAR) analysis. Ren. Energ. 139:198-213. https://doi.org/10.1016/j.renene.2019.01.010

Charfeddine, L., & Khediri, K. B. (2016). Financial development and environmental quality in UAE: Cointegration with structural breaks. Ren. Sustain. Energ. Rev., 55, 1322-1335. https://doi.org/10.1016/j.rser.2015.07.059

Di Gianfrancesco, A. (2017). Worldwide overview and trend for clean and efficient use of coal. In Materials for Ultra-Supercritical and Advanced Ultra-Supercritical Power Plants (pp. 643-687). Woodhead Publishing. https://doi.org/10.1016/B978-0-08-100552-1.00019-1

Dogan, E., & Ozturk, I. (2017). The influence of renewable and non-renewable energy consumption and real income on CO 2 emissions in the USA: evidence from structural break tests. Environ. Sci. Pollut. Res., 24(11), 10846-10854. https://doi.org/10.1007/s11356-017-8786-y

Fei, L., Dong, S., Xue, L., Liang, Q., & Yang, W. (2011). Energy consumption-economic growth relationship and carbon dioxide emissions in China. Energ. Pol., 39(2), 568-574. https://doi.org/10.1016/j.enpol.2010.10.025

Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth?. Amer. Econ. Rev., 89(3), 379-399. https://doi.org/10.1257/aer.89.3.379

He, X., Adebayo, T. S., Kirikkaleli, D., & Umar, M. (2021). Analysis of Dual Adjustment Approach: Consumption-Based Carbon Emissions in Mexico. Sust. Prod. and Con. 4(3), 10-26

Inglesi-Lotz, R., & Dogan, E. (2018). The role of renewable versus non-renewable energy to the level of CO2 emissions a panel analysis of sub-Saharan Africa's Βig 10 electricity generators. Ren. Energ., 123, 36-43 https://doi.org/10.1016/j.renene.2018.02.041

International Monetary Fund, (2019) https://data.imf.org/?sk=1C28EBFB-62B3-4B0C-AED3-048EEEBB684F

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. Sustain., 11(18):4850. https://doi.org/10.3390/su11184850

Joshua, U., Bekun, F. V., & Sarkodie, S. A. (2020). New insight into the causal linkage between economic expansion, FDI, coal consumption, pollutant emissions and urbanization in South Africa. Environ. Sci. Pollut. Res., 1-12. https://doi.org/10.1007/s11356-020-08145-0

Kalmaz, D. B., & Adebayo, T. S. (2021). Determinants of CO 2 emissions: empirical evidence from Egypt. Environ. Eco. Stat.,, 1-24.

Kalmaz, D. B., & Kirikkaleli, D. (2019). Modeling CO 2 emissions in an emerging market: empirical finding from ARDL-based bounds and wavelet coherence approaches. Environ. Sci. Pollut. Res., 26(5), 5210-5220. https://doi.org/10.1007/s11356-018-3920-z

Kalayci, C. (2019). The impact of economic globalization on CO2 emissions: the case of NAFTA countries. Int. J. of Energ. Econ. and Pol., 9(1), 356.

Khan, M. K., Teng, J. Z., & Khan, M. I. (2019). Effect of energy consumption and economic growth on carbon dioxide emissions in Pakistan with dynamic ARDL simulations approach. Environ. Sci. Pollut. Res., 26(23), 23480-23490.https://doi.org/10.1007/s11356-019-05640-x

Khan, M. K., Teng, J. Z., Khan, M. I., & Khan, M. O. (2019). Impact of globalization, economic factors and energy consumption on CO2 emissions in Pakistan. Sci. Tot. Environ., 688, 424-436. https://doi.org/10.1016/j.scitotenv.2019.06.065

Khan, M. T. I., Yaseen, M. R., & Ali, Q. (2017). Dynamic relationship between financial development, energy consumption, trade and greenhouse gas: comparison of upper middle income countries from Asia, Europe, Africa and America. J. of Clean. Prod., 161, 567-580. https://doi.org/10.1016/j.jclepro.2017.05.129

Kirikkaleli D, Adebayo TS. (2020). Do renewable energy consumption and financial development matter for environmental sustainability? New global evidence Sustain. Dev., https://doi.org/10.1002/sd.2159 https://doi.org/10.1002/sd.2159

Kirikkaleli, D., & Kalmaz, D. B. (2020). Testing the moderating role of urbanization on the environmental Kuznets curve: empirical evidence from an emerging market. Environ. Sci. Pollut. Res., 27(30), 38169-38180. https://doi.org/10.1007/s11356-020-09870-2

Kirikkaleli, D., Adebayo, T. S., Khan, Z., & Ali, S. (2020). Does globalization matter for ecological footprint in Turkey? Evidence from dual adjustment approach. Environ. Sci. Pollut. Res., 1-9. https://doi.org/10.1007/s11356-020-11654-7

Liu, M., Ren, X., Cheng, C., & Wang, Z. (2020). The role of globalization in CO2 emissions: A semi-parametric panel data analysis for G7. Sci. Tot. Environ., 718, 137379. https://doi.org/10.1016/j.scitotenv.2020.137379

Magazzino, C., Bekun, F. V., Etokakpan, M. U., & Uzuner, G. (2020). Modeling the dynamic Nexus among coal consumption, pollutant emissions and real income: empirical evidence from South Africa. Environ. Sci. Pollut. Res., 27(8), 8772-8782.https://doi.org/10.1007/s11356-019-07345-7

Nguyen, T., & Le, Q. (2020). Impact of globalization on CO2 emissions in Vietnam: An autoregressive distributed lag approach. Dec. Sci. Lett., 9(2), 257-270. https://doi.org/10.5267/j.dsl.2019.10.001

Odhiambo, N. M. (2016). Coal consumption and economic growth in South Africa: An empirical investigation. Energ. & Environ., 27(2), 215-226. https://doi.org/10.1177/0958305X15627535

Odugbesan, J. A., & Adebayo, T. S. (2020). The symmetrical and asymmetrical effects of foreign direct investment and financial development on carbon emission: evidence from Nigeria. SN App. Sci., 2(12), 1-15. https://doi.org/10.1007/s42452-020-03817-5

Onyibor, K., & Akinsola, G. D., & Adebayo, T. S. (2020). The impact of major macroeconomic variables on foreign direct investment in Nigeria: evidence from a wavelet coherence technique. SN Bus. & Econ., 1(1), 1-24. https://doi.org/10.1007/s43546-020-00018-5

Ozatac, N., Gokmenoglu, K. K., & Taspinar, N. (2017). Testing the EKC hypothesis by considering trade openness, urbanization, and financial development: the case of Turkey. Environ. Sci. Pollut. Res., 24(20), 16690-16701. https://doi.org/10.1007/s11356-017-9317-6

Pata, U. K. (2018a). The effect of urbanization and industrialization on carbon emissions in Turkey: evidence from ARDL bounds testing procedure. Environ. Sci. Pollut. Res., 25(8), 7740-7747. https://doi.org/10.1007/s11356-017-1088-6

Pata, U. K. (2018b). The influence of coal and noncarbohydrate energy consumption on CO2 emissions: revisiting the environmental Kuznets curve hypothesis for Turkey. Energ., 160, 1115-1123. https://doi.org/10.1016/j.energy.2018.07.095

Pata, U. K. (2018c). Ren. Energ. consumption, urbanization, financial development, income and CO2 emissions in Turkey: testing EKC hypothesis with structural breaks. J. of Clean. Prod., 187, 770-779. https://doi.org/10.1016/j.jclepro.2018.03.236

Phillips, P. C., & Hansen, B. E. (1990). Statistical inference in instrumental variables regression with I (1) processes. The Rev. of Econ. Stud., 57(1), 99-125. https://doi.org/10.2307/2297545

Rjoub, H., Odugbesan, J. A., Adebayo, T. S., & Wong, W. K. (2021). Sustainability of the Moderating Role of Financial Development in the Determinants of Environmental Degradation: Evidence from Turkey. Susain.., 13(4), 1844. https://doi.org/10.3390/su13041844

Raza, M. Y., & Shah, M. T. S. (2019). Analysis of coal-related energy consumption in Pakistan: an alternative energy resource to fuel economic development. Environ., Dev. and Sustain., 1-22. https://doi.org/10.1007/s10668-019-00468-4

Saidi K, Mbarek MB (2017). The impact of income, trade, urbanization, and financial development on CO 2 emissions in 19 emerging economies. Environ. Sci. Pollut. Res., 24(14):12748-12757. https://doi.org/10.1007/s11356-016-6303-3

Sarkodie, S. A., & Adams, S. (2018). Ren. Energ., nuclear energy, and environmental pollution: accounting for political institutional quality in South Africa. Sci. Tot. Environ., 643, 1590-1601. https://doi.org/10.1016/j.scitotenv.2018.06.320

Shahbaz, M., Tiwari, A. K., & Nasir, M. (2013). The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energ. Pol., 61, 1452-1459. https://doi.org/10.1016/j.enpol.2013.07.006

Stock, J. H., & Watson, M. W. (1993). A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica: J. of the Econ. Soc., 783-820. https://doi.org/10.2307/2951763

Umar M, Ji X, Kirikkaleli D, Xu Q (2020) COP21 Roadmap: Do innovation, financial development, and transportation infrastructure matter for environmental sustainability in China? J. Environ. Manag., 271:111026. https://doi.org/10.1016/j.jenvman.2020.111026

Usman O, Akadiri SS, Adeshola I (2020) Role of Ren. Energ. and globalization on ecological footprint in the USA: implications for environmental sustainability. Environ. Sci. Pollut. Res., 27:1-13. https://doi.org/10.1007/s11356-020-09170-9

Wang, S. S., Zhou, D. Q., Zhou, P., & Wang, Q. W. (2011). CO2 emissions, energy consumption and economic growth in China: A panel data analysis. Energ. Pol, 39(9), 4870-4875. https://doi.org/10.1016/j.enpol.2011.06.032

World Bank. (2018). worldbank.org/en/798731523331698204/South-Africa-Economic-Update-April-2018. Retrieved 10 December 2020. https://doi.org/10.1596/29724

Word Development Indicators (WDI, 2019) https://databank.worldbank.org/source/world-development indicators#advancedDownloadOptions. Retrieved 10 December 2020.

World Economic Outlook Database, November (2020). IMF.org. Inter. Mon. Fun. Retrieved 19 November 2020.

Zhang, L., Li, Z., Kirikkaleli, D., Adebayo, T. S., Adeshola, I., & Akinsola, G. D. (2021). Modeling CO 2 emissions in Malaysia: an application of Maki cointegration and wavelet coherence tests. Environ. Sci. Pollut. Res., 1-15. https://doi.org/10.1007/s11356-021-12430-x




Copyright (c) 2021 The Authors. Published by Centre of Biomass and Renewable Energy (CBIORE)

Creative Commons License This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.