Journal of Pollution

Non-linear effect of financial development and urbanization on carbon Emissions

Abstract

Hooi Hooi Lean, Kizito Uyi Ehigiamusoe and Sikiru Jimoh Babalola

Several countries seek various measures to reduce carbon emissions because of the detrimental effects of carbon emissions on global warming, climate change and ecosystem. Therefore, an insight into the causes of carbon emissions is fundamental for policy formulation. This paper examines the non-linear effects of financial development and urbanization on carbon emissions in 31 African countries for the 1990-2016 period. This study employs various techniques to examine the integration and cointegration properties as well as estimates the parameters of the variables. First, it reveals that an inverted U-shaped relationship exists between real GDP and carbon emissions in African countries, thereby supporting the EKC hypothesis. The implication of this finding is that African countries can reduce carbon emissions through the acceleration of real GDP. African countries may actually grow-out of environmental pollution. The results also show an inverted U-shaped relationship between financial development and carbon emissions, albeit the non-linear relationship between urbanization and carbon emissions is tenuous.