Transcript Choosing a Life Partner

ENERGY CONSUMPTION,
POLLUTION CONTROL AND
ECONOMIC GROWTH IN
NIGERIA
BY
FOLUSO AKINSOLA
AND
BABATUNDE W. ADEOYE, Ph.D
DEPARTMENT OF ECONOMICS,
UNIVERSITY OF LAGOS
Introduction
 Issue of concern
 Literature Review
 Methodology
 Empirical Result and Analysis
 Conclusion

Prior to the age of industrialization,
environmental problems were local and
minor, because of the earth's own ability to
absorb and purify minor quantities of
pollutants through natural means such as
the carbon, nitrogen, oxygen and water
cycles among others.
 Towards the middle of the twentieth
century however, the quantities of various
pollutants in the atmosphere began to be
too enormous to be eliminated by the
natural cycles alone.

During the last decade many experts have warned
against the risk of global climate change deriving
from
the
increasing
accumulation
of
anthropogenic Greenhouse Gases (GHGs) in the
atmosphere.
 The
Millennium Development Goals (MDGs)
explicitly commit the world community to making
progress in achieving environmental sustainability
 The primary air pollutants found in most urban
areas are carbon, sulphur, nitrogen and
hydrocarbons. These pollutants are dispersed
throughout
the
world's
atmosphere
in
concentrations high enough to gradually cause
serious health problems.

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

The increased atmospheric concentrations of Carbon dioxide
(CO2) and other GHGs are responsible for melting ice, rising
sea levels, and a greater number of more destructive storms.
Pollution from various industries, the burning of fossil fuels,
methane from farm animals, forest destruction, rotting/dead
vegetation etc have led to an increased number of
greenhouse gases in the atmosphere.
The World Health Organization (WHO) states that 2.4 million
people die each year from causes directly attributable to air
pollution (WHO, 2007).
The substantial damage to the Nigerian Environment by air
pollution has been traceable to the growth of the oil industry,
population explosion and a lack of environmental
regulations. Nevertheless, other sources like automobiles and
diesel-fired electricity generators also contribute to air
pollution. In 2001, Nigeria emitted about 23.5 million metric
tons of carbon, slightly down from a high of 27.7 million metric
tons of carbon emitted in 1996
Several
years
ago,
problems
of
environmental quality were only unique to
developed and industrial economies.
 Developing economies were thought to
have fewer environmental problems , but
now, it has become clear that massive
environmental degradation has in fact
occurred in developing world.
 The environmental deterioration is rather
serious involving diminishing economic
productivity and acceleration of social
dislocation

Gas flaring in Nigeria, is a major cause of air
pollution. According to data from the
Carbon Dioxide Information Analysis
Center, gas flaring accounted for 40% of
carbon emissions in 2005.
 Due to a lack of gas utilization
infrastructure, more gas is flared in Nigeria
than anywhere else in the world (FOE, 2005)
 Close to 2.5 billion cubic feet of gas is flared
in Nigeria every day, amounting to about
70 million tons of Carbon (UNDP/World
Bank, 2004).
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Environmental problems in developing countries are
in fact, more likely to be matters of life and death
than they are in the developed world.
Therefore, the relationship between carbon emissions
and economic growth has important implications for
environmental and economic policies.
Grossman and Kruger (1995) showed that the link
between economic growth and environmental
pollution follows an inverted U-shaped pattern,
referred to as the Environmental Kuznets Curve (EKC).
This finding suggests that lower income regions are
‘too poor to be green’, and only when they become
rich enough will the benefits from a clean
environment outweigh its costs.

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
As far as studies on Carbon emissions are concerned,
the existence of a bell-shaped relationship between
pollutants and income, postulated by the EKC
hypothesis, has only been confirmed in some panel
studies for Organization for Economic Co-operation
Development (OECD) countries .
Many authors claim that the EKC hypothesis does not
hold for global pollutants that have long-lasting
effects, and for which abatement costs tend to be
high, such as Carbon dioxide (CO2).
Nigeria happens to be a dumping ground for old
technologies. Moreover, trade openness that
contributes to growth in the GDP per capita will
increase the levels of pollution unless the necessary
measures are taken to prevent this from happening

The broad objective of this study is to analyze the link
between air pollution and economic growth in Nigeria in
order to ascertain if the Environmental Kuznets Curve
(EKC) hypothesis holds for Nigeria by examining the
relationship between economic growth and air pollution.

The study made use of secondary data sourced from the
Central Bank of Nigeria (CBN) Statistical bulletin of various
years, as well as the websites of the Energy Information
Administration and the Carbon Dioxide Information
Analysis Center. This study examined data specific to the
Nigerian economy for the period 1980 – 2006. Since
Nigeria is highly dependent on fossil fuels, the reduction of
carbon emissions represents a serious environmental
challenge for the Nigerian economy. It is of paramount
interest for the purpose of economic, social and
environmental policies to investigate whether increase in
per capita income actually leads to a reduction in
pollution in Nigeria.


Carbon dioxide (CO2) is one of the major pollutants in the
atmosphere, and is responsible for about 57% of the global
warming trend (NOAA, 2005). It is estimated that
extraction and burning of fossil fuels is the source of about
70-90% of anthropogenic carbon dioxide emissions
(Strong, 1992; Edge and Tovey, 1996).
According to Olusegun (2009), growing population and
rising per capita economic growth have fuelled the
increase in emissions rates in broad terms. Two trends
appear to be taking hold; the amount of energy used per
unit of gross domestic product is increasing after years of
decline. This could mean that gains in energy efficiency
are slowing, or there is a growth of heavy industries.
Second, the energy sources that countries are using are
more carbon-intensive than in the past.
Ikeme (2008) points out that climate change is expected to
bring about a shift in climatic belts resulting in greater fruitlessness
in the tropics with huge impacts on energy production and
supply.
 According
to him, because Nigeria relies heavily on
hydroelectricity which accounts for over 36% share of its
electricity energy sources, the resulting interruptions in power
supply due to limitations in available generation capacity in the
hydro stations would not only result in waste of national
resources; but will also have adverse effect on the
manufacturing sector of the economy.
 Smulders (2000) asserts that economic growth, which has
brought about huge improvements in the standard of living
during the past decades have not been without a dark side. Air
pollution, municipal waste problems, loss of wilderness areas,
habitat destruction, threats to biodiversity, resource depletion,
and the global greenhouse problem seem to be linked to
economic growth.


Economic growth has increased productivity and
technological progress, however, if care is not taken
can also cause damages to the environment.

A clean environment boosts productivity of
production factors so that it has a productive value.

The standard policy measures for greenhouse gases
abatement are basically four – Kyoto Protocol.
› energy efficiency improvement measures,
› command-and-control measures (i.e., implementing
emission reduction targets by decree),
› domestic carbon taxes and
› an international emissions trading regime.

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Halicioglu, F. (2008) uses the following model in his estimation of the long-run
relationship between Carbon dioxide (CO2) emissions, energy consumption,
economic growth and foreign trade in linear logarithmic quadratic form with
a view of testing the validity of the Environmental Kuznets Curve (EKC)
hypothesis as follows:
Ct = a0 + a1 et + a2 yt + a3 yt2 + a4 ft +εt………………………………….(4.1)
Where Ct is CO2 emissions per capita, et is commercial energy use per
capita, yt is per capita real income, yt2 is square of per capita real income, ft
is openness ratio which is used as a proxy for foreign trade and εt is the
regression error term. This study adapts the above model into the form shown
below, and makes use of the Error Correction Model (ECM) in its estimation:
The mathematical model is represented by:
CEMC = f (GRGDPPC, GDPPCSQ, ENECON, TO)………………………….. (4.2)
While the econometric model is represented by:
CEMC = β 0 + β 1GRGDPPC) + β2LOG (GDPPCSQ) + β3LOG (ENECON) + β 4
(TO) + ε
CEMC- CARBON EMISSION, GRGDPPC- GROWTH RATE OF GDP,
ENECON-ENRGY CONSUMPTION IN NIGERIA, TO-TRADE OPENNESS
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
β1 > 0, β2 < 0, β3 > 0, β4 > 0
under the Environmental Kuznets curve
hypothesis, the sign of β1 is expected to be
positive, whereas, a negative sign is expected
for β2. One expects that because higher level
of energy consumption should result in greater
economic activity and stimulate CO2
emissions, β3 should be greater than zero. The
sign for β4 is expected to be positive in a
developing country as they tend to have dirty
industries with heavy share of pollutants, as
discussed in Grossman and Krueger (1995)
Null Hypothesis:
F-Statistic
Probability
3.10297
0.06703
CEMC does not Granger Cause GDPPC
0.03953
0.96132
ENECON does not Granger
1.71203
0.20591
CEMC does not Granger Cause ENECON
0.32206
0.72835
TO does not Granger Cause
6.45182
0.00688
0.22344
0.80174
GDPPC
does
not
Granger
Cause CEMC
Cause CEMC
CEMC
CEMC does not Granger Cause TO

The null hypothesis was rejected at the
10% level of significance for Gross
Domestic product and trade openness.
That is, Gross Domestic Product and
Trade openness granger causes Carbon
emissions, but not vice versa. Hence
causality is unidirectional. There is no
causality between energy consumption
and carbon emissions
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
0.002857
0.008626
0.331141
0.7442
D(GRGDPPC)
-0.123905
0.061395
-2.018153
0.0579
D(LOG(GDPPCSQ),2)
6.540905
3.114692
2.100017
0.0493
D(LOG(ENECON))
-0.447450
0.179245
-2.496304
0.0219
D(LOG(TO),2)
-0.022393
0.015349
-1.458946
0.1609
ECM(-1)
-0.656492
0.228683
-2.870745
0.0098
R-squared
0.560450
Adjusted R-squared
0.444779
F-statistic
4.845211
Durbin-Watson stat
1.811204
Prob(F-statistic)
0.005037

These variables are Growth rate of GDP per Capita
(GRGDPPC), GDP per Capita squared (GDPPCSQ),
and energy consumption (ENECON).

The error correction mechanism parameter (ECM) is
also significant. Their significance is also indicated by
the value of their probabilities. Therefore, from the
findings above, we reject the null hypotheses that
GDP
per
Capita
(GRGDPPC) and
energy
consumption
(ENECON)
are
not
significant
determinants of carbon emissions in Nigeria. While we
accept the null hypothesis that trade openness (TO)
is not a determinant of carbon emission in Nigeria.
The main conceptual framework for this study is the Environmental
Kuznets curve hypothesis, which asserts that there is an inverted Ushaped relationship between air pollution and economic growth.
Implying that with an increase in economic growth, air pollution tends
to increase, get to a peak, and then decrease as countries see the
need for a cleaner environment.
 The evidence presented in this paper shows that there is no evidence
for the common inverted U-shaped pathway for carbon emissions in
Nigeria which is hypothesized that countries follow as their income
rises. It seems unlikely that the Environmental Kuznets Curve (EKC)
hypothesis is a complete model of emissions or concentrations.
Perhaps the most important insight is in Grossman and Krueger’s (1995)
original paper: ‘We find no evidence that economic growth does
unavoidable harm to the natural habitat’
 Pearson’s (1994) conclusion seems to be the most coherent and
logical when he says that the relationship between economic growth
and the environment should be treated as an instrument of projection,
or as a path – where and how economic growth reduces pollution.
EKC hypothesis is not a convincing tool able to explain how a n
economy deals with its environmental quality while growing.

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
Research should be done in the area of cleaner sources of fuel such
as solar energy, hydroelectric power and wind energy to reduce
resultant pollutions from the use of fossil fuels.
Nigeria should design new environmental policies to reduce
environmental degrading, especially in the area of gas flaring and
release of toxic gases from industries and vehicles.
The policies to tackle environmental pollutants require the
identification of some priorities to reduce the initial costs and
efficiency of investments. Nigeria should measure the exact scale of
environmental pollutants that it generates and imports by industries.
Apart from rules and regulations to reduce pollutant emissions, the
market based solutions in the form of pollutant taxes would ease the
extent of this problem. Telli et al. (2008) presents useful policy
alternatives in which carbon tax is used as a main policy tool.
Nigeria should incorporate environmental concerns into her
macroeconomic policies more intensely to reduce the pollutant
emissions and to sustain economic growth
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