Carbon emission and economic growth in Nigeria: Toda- Yamamoto causality approach

Abstract

Environmental pollution has been neglected in literature especially in developing countries like Nigeria. Carbon emission is a great source of environmental pollution. This poses a great challenge to economic growth in Nigeria. There has been controversy if carbon emission leads to economic growth or if economic growth leads to carbon emission. Therefore, this study examined the effect of carbon emission on economic growth in Nigeria and also determined the direction of the relationship using the Toda Yamamoto Approach. Annual time series data between 1981 and 2020 were employed. The dependent variable is economic growth (Y), the independent variables includes, carbon emissions (CO2), energy consumption, capital (K), and labour (L). Unit root result shows that the variables are stationary after first differencing. The cointegration result indicates there is long run relationship among the variables. Toda Yamamoto causality shows there is a bi-directional causality between economic growth and carbon emissions in Nigeria. Also, the study finds that carbon emission (CO2) had positive and significant effect on economic growth in Nigeria. The study recommends that the effect of carbon emission should not be neglected due to environmental hazard caused by it. Therefore, the government/non-governmental organizations should increase awareness on the effect of carbon emission and encourage eco-friendly technology to drive economic activities so that it can lower carbon emissions in the long run.