THE EFFECT OF ENERGY AND URBANISATION ON CARBON DIOXIDE EMISSION: EVIDENCE FROM GHANA

Abstract

Concerned with the declining trend of renewable energy consumption as well as a change in the energy mix for electricity production amidst growing urban population and carbon dioxide (CO2) emission in Ghana, this study examines the effect of urbanisation and energy on carbon dioxide emission in Ghana within the framework of the Environmental Kuznets Curve (EKC) Hypothesis over the period 1971–2013. Estimation results from Fully Modified OLS confirm the presence of the EKC hypothesis over the period for Ghana. In addition, combustible renewables and waste consumption, electricity production from hydro and trade openness are found to reduce carbon dioxide emission while fossil fuel consumption, electricity production from fossil fuels, urbanisation and industrialisation increase carbon dioxide emission for Ghana. The study again finds that an interaction between urbanisation and combustible renewables and waste consumption, however, has a positive effect on CO2 while the interaction between urbanisation and fossil fuel consumption has a negative effect. Further analysis using the Engel–Granger causality test, the variance decomposition and impulse response functions are embarked. The outcome of the study implies the need to pursue the implementation of the low-carbon development strategy.