Analysis of the Relationship between Carbon Dioxide Emissions, Energy Supply from Fossil Fuel, Energy Consumption and GDP: Nigerian Case

Abstract

Human actions, like releasing greenhouse gases (GHGs) by burning fossil fuels, are the primary cause of global warming. Economic growth has had both positive and negative effects. Particularly, in developing countries like Nigeria, economic growth has sometimes led to climate change and increased greenhouse gas emissions. Previous studies pointed out that because resources are limited, it is crucial to find alternative options to fossil fuels in order to stop global warming from worsening. The power sector is the most significant source of CO2 pollution in Nigeria. Accordingly, about 80% of the country's energy comes from the off-grid or decentralized system, driven by gasoline and diesel. This causes significant environmental pollution, and so, we need to think about our future energy needs and how to stop pollution. Through the lens of natural resources and environmental economics, this study looks at the links between economic growth, environmental pollution, and energy use. It also looks into the relationship between GDP and pollution, like CO2 emissions, and the relationship between economic expansion and energy use. In addition, it seeks to answer the question What is the relationship and the causal direction between carbon dioxide emissions and energy supply/demand and economic growth? and What are the appropriate energy policies to attain the goal of greenhouse gas reduction in an economy mainly dependent on fossil fuel production and consumption? To this end, this study uses Autoregressive Distributed Lag (ARDL) and a cointegration test on data from 1990 to 2020 to investigate how these relationships change over time. The International Energy Agency and the World Bank provided the study statistics on total energy use, energy supply from oil and gas, CO2 per person, and GDP per person. The results of the ARDL short-run model reveal that CO2 emissions in the past added to CO2 levels today. This suggests that activities that hurt the environment in the past play a significant role in climate change today. Moreover, oil and gas energy supply affected CO2 emissions because more energy is used. Furthermore, the results of our causality study show that using energy (especially oil and gas) makes a big difference in CO2 pollution. However, GDP does not make a big difference in CO2 pollution. Hence, the present study proposes changes to policies on energy and the environment, alternative energy, energy transition, decoupling, and green energy to simultaneously reduce CO2 emissions and boost economic growth. Indeed, long-term plans for sustainable growth and strong political will are needed to switch from fossil fuels to renewable energy. Building the infrastructure necessary for an economy based on renewable energy takes longer than one term of a governments administration. Thus, to keep the energy transition plan going, a strong legal framework that is safe from the vested interests of politicians is necessary. Additionally, people need to be committed to solving the short-term problems that arise during the shift to a low-carbon economy.

Keywords: CO2, ARDL, Short-run, Causality, Energy–¬environment–economic policies, Nigeria