Could Africa leapfrog to a low-carbon future? Evidence on the nexus between environmental tax, foreign direct investment, resource dependence, and technological progress.

Abstract

The devastating impact of climate change has intensified discussions on balancing sustainable economic growth with environmental sustainability achievement. To contribute to the discourse, this study explores how environmental tax, foreign investment, natural resource (NRR), and technological innovation impact Sub-Saharan Africa's efforts towards a low-carbon future. Using data from 1995 to 2019 and advanced methodologies (Cross Sectional Augmented Autoregressive Distributed Lag, and Method of Moments Quantile Regression), the results showed that environmental taxes effectively minimize carbon emissions. FDI in the short run causes carbon emissions to rise slowly but causes a significant reduction in the long run. An increase in natural resources rent was found to cause damage to the environment significantly while technological innovation in the long run demonstrates a significant reduction in carbon emissions. The MMQR results confirm environmental tax significantly reduced CO₂ emissions in all the quantiles. FDI and Technology in the long run cause a reduction in CO₂ emissions while natural resource rent causes environmental destruction in all the quantiles. We recommend that policymakers introduce more carbon tax policies, establish sub-regional carbon offset markets, and prioritize the development of clean energy infrastructure.