Development of a green economy has become a key approach for stimulating social and economic growth worldwide. There is a growing conviction that, protecting and improving natural habits require engaging in practices and investing in economic activities that will advances environmental sustainability.
The concept of “green economy” denotes a change toward a more comprehensive strategy for growth, one that recognizes the connection of economic development, social improvement, and environmental preservation. The green economy aims to achieve a healthy balance between human wellbeing and the preservation of ecosystems by incorporating sustainability concepts into economic decision-making processes.
Using this perspective, a green economy connects with and expands on the goals outlined in Agenda 21, the United Nations’ comprehensive action plan adopted at the 1992 Earth Summit. Agenda 21 high lights the necessity of handling social, economic, and environmental concerns leveraging on a holistic approach. Furthermore, the green economy is inextricably linked to the United Nations’ Sustainable Development Goals (SDGs) set in 2015. The SDGs provide a roadmap for a more sustainable future, embracing a diverse set of interrelated goals such as poverty eradication, quality education, gender equality, climate action, and responsible consumption and production. The green economy, which promotes environmentally friendly technology, renewable energy sources, sustainable agriculture, and green innovation, is critical to achieving these goals.
Numerous economies are currently grappling with fiscal crises, as governments struggle to strike a balance between public spending and taxation, resulting in budget cuts to green economy initiatives and environmental risks mitigation. The extent of government expenditure within a green economy, the effectiveness of government actions, and the relationship between the composition of government spending and economic growth collectively influence the implementation of fiscal policies. Altering the level and composition of overall government expenditure, along with enhancing its efficacy, can bolster a country’s adoption of renewable energy. This study investigates how government expenditure and the effectiveness of government actions can facilitate the transition to a green economy in Africa. The study’s contributions to literature and policy discussions are multifaceted. Firstly, it addresses a notable gap in existing literature by investigating the simultaneous impact of government spending and effectiveness of governmental tactics on renewable energy adoption in developing economies—an area that has received limited attention to date. Secondly, by exploring the influence of government effectiveness on the green economy movement, the study offers valuable insights into governance strategies that can facilitate a successful transition. Finally, this research underscores the importance of allocating resources and investing in environmentally friendly initiatives, emphasizing the pivotal role of public funding in promoting sustainable economic growth.
This study examines the relationship between government expenditure, government effectiveness, and renewable energy consumption in 40 African countries with data spanning from 1990 to 2021. The data for each variable is sourced from the World Development Indicators of the World Bank. The main dependent variable, renewable energy consumption (RENE), is measured as the proportion of total energy consumption derived from renewable sources. The independent variables include government expenditure (GOVEX) and Government effectiveness (GEFF). Government expenditure is measured as general government final consumption expenditure as a percentage of GDP. Government effectiveness (GEFF) is assessed using a World Bank indicator that captures perceptions of public service quality, civil service independence, policy formulation and implementation, and government commitment to these policies, ranging on an aggregate scale from approximately -2.5 to 2.5. Additionally, other control variables such as trade openness (TRADE), foreign direct investment (FDI), and urbanization (URB) are considered. FDI is measured as the percentage of GDP representing inflows of foreign direct investment, while trade is represented by the import and export of goods and services as a percentage of GDP. Urbanization is assessed using the proportion of the total population residing in urban areas.
In this study, both the random effects and fixed effects methods are employed to estimate the models. To determine which model is appropriate for equation estimation, the Hausman test was conducted. Utilizing the fixed effects technique, the findings indicate a positive significant relationship between government expenditure and renewable energy consumption, while government effectiveness demonstrates a significant negative influence. Additionally, trade openness and urbanization exhibit a negative impact on renewable energy usage. The effect of foreign direct investment (FDI) on renewable energy consumption is found to be mixed. To facilitate the transition towards a greener energy future in Africa, the study recommends several measures including increasing government expenditure on renewable energy, enhancing government effectiveness, promoting sustainable trade practices, and prioritizing sustainable urban planning.
This study is published in IGI Global as a book chapter. Details of the study, methods used, findings and practical implications can be found at: https://www.igi-global.com/chapter/the-road-to-a-greener-future/329084. The following people are the authors of this chapter: Alhassan Bunyaminu, Shani Bashiru, Ibrahim Nandom Wahab Abdul Iddrisu, Adibura Baba Seidu, Adibura Baba Seidu & Ahmed Jamal Iddrisu.
