Agricultural Production, Renewable Energy Consumption, Foreign Direct Investment, and Carbon Emissions: New Evidence from Africa

Abstract

This paper explores the nexus between agricultural production, renewable energy, foreign direct investment (FDI), and carbon emissions in Africa, where there is limited evidence on the topic. Relying on panel data covering thirty-one African countries obtained from the World Bank World Development Indicators and FAOSTAT databases, we answered the question of whether agricultural production (proxied by livestock production, fertilizer consumption, and land under cereal cultivation), the use of renewable energy, and FDI increase or reduce carbon emissions. Using the panel autoregressive distributed lag model for analysis, our results show that net FDI, fertilizer consumption, livestock production significantly increased carbon emissions, both in the short run and long run. Meanwhile, renewable energy use consumption significantly decreased carbon emissions, both in the short run and long run. Specifically, a 1% increase in net FDI increased total carbon emissions by 0.003% in the short run and by 0.01% in the long run. Renewable energy consumption significantly decreased carbon emissions, both in the short run and long run. A 1% increase in renewable energy consumption decreased total carbon emissions by 0.16% in the short run and by 0.22% in the long run. Additionally, fertilizer consumption and livestock production significantly increased carbon emissions in the short run and long run. A 1% increase in fertilizer consumption increased total carbon emissions by 0.01% in the short run and by 0.04% in the long run, while a 1% increase in livestock production increased total carbon emissions by 0.20% in the short run and by 0.56% in the long run. The findings call for investment in renewable energy technologies and consumption while advocating for large-scale uptake of climate-smart agriculture, and environmentally friendly targeted foreign direct investments on the continent.