Electricity Consumption, Carbon Emissions and Economic Growth in Nigeria

Abstract

This paper applies a Multivariate Vector Error Correction (VECM) framework to examine the long run and causal relationship between electricity consumption, carbon emissions and economic growth in Nigeria. Using annual time series data for 1970 to 2008, findings show that in the long run, economic growth is associated with increase carbon emissions, while an increase in electricity consumption leads to an increase in carbon emissions. These imply that Nigeria’s growth process is pollution intensive, while the negative relationship between electricity consumption (or positive relationship between electricity consumption) and emissions in Nigeria is a clear indication that electricity consumption in the country has intensified carbon emissions. No support was obtained for the hypothesized environmental Kuznets curve (EKC). Granger-causality results confirm a unidirectional causality running from economic growth to carbon emissions, indicating that carbon emissions reduction policies could be pursued without reducing economic growth in Nigeria. No causality was found between electricity and growth, in either way, which further lends credence to the crisis in the Nigerian electricity sector. Overall, the paper submits that efficient planning and increased investment in electricity infrastructure development may be the crucial missing variable in the obtained neutrality hypothesis between electricity and growth.  Keywords: Electricity consumption; Economic growth; Carbon emission; NigeriaJEL Classifications:  Q43; Q49