Towards Environmental Sustainability: Evaluating the Role of Energy Consumption, FDI, and Urbanization on Carbon Emission in Somalia: An Empirical Analysis using ARDL Bound Test

Abstract

CO2 emissions stand for a global challenge due to their cross-border nature, contributing substantially to environmental degradation. Since the Industrial Revolution, affluent nations have accelerated economic growth, worsening this issue. However, this study examines the causal links between energy consumption, FDI, urbanization, and carbon emissions in Somalia from 1991 to 2020. The ARDL bounds test is used as a suitable method to estimate the long-run co-integration among the study's variables. The findings show that in the long run, energy consumption, FDI, and urbanization have a positive effect on CO2 emissions in Somalia. Additionally, economic growth contributes to carbon emissions, while trade openness helps reduce environmental pollution in the long run. Moreover, the study applied Granger causality to find out the directions of these relationships, revealing bidirectional causal links between economic growth and carbon emissions, and between urbanization and FDI. It also found unidirectional causality from carbon emissions to energy consumption, from FDI to carbon emissions, and from urbanization to CO2 emissions. The study recommended that Somali government must reconsider its energy policy to promote greener energy. Additionally, Somalia should increase investment in R&D for energy efficiency and renewable energy to minimize the carbon emissions resulting from FDI.