Do domestic credits to the private sector contribute to zero carbon emissions in Africa? A quantile regression analysis

Abstract

Abstract Domestic credits to the private sector have played a significant role in reducing CO2 emissions in various developing and developed countries. This study aims to investigate whether domestic credits to the private sector have a similar impact on CO2 emissions in a sample of 34 selected African countries spanning from 2000 to 2020. Utilizing the method of moment quantiles regression (MM_QR), we incorporated variables such as economic growth, natural resource rents, renewable energy consumption, and trade into our regression model. The results indicate that domestic credits to the private sector in selected African countries lead to an increase in CO2 emissions across all quantiles (10–90th).Moreover, economic growth and trade are linked to increased CO2 emissions across all quantiles. The findings reveal an asymmetric relationship between natural resources rent and CO2 emissions, with a reduction at lower quantiles and an increase at higher quantiles. In contrary, renewable energy consumption demonstrates a consistent reduction in CO2 emissions across all quantiles. These results are robust to panel corrected standard error (PCSE). The policy implications are for African governments to enact sustainable practices in the private sector, such as offering tax incentives for businesses embracing green technologies. Investing in green financial development to promote economic growth and switching from fossil fuels to renewable energy are important to curb CO2 emissions. These measures will further reduce CO2 emissions and help achieve net zero emissions in the region by 2050.

Keywords

• Climate change
• CO2 emissions
• Natural resource rents
• Domestic credit to private sector