Impact of Environmental Degradation on Economic Growth: Testing the Environmental

Abstract

Looking at the contribution of economic activity in the country, it is seen to add robustness to growth and development, but in contrast give birth to greenhouse gases (GHGs), such as CO2 CO2 which is also called carbon dioxid, CH4 which is also called methane, and N2O represent nitrous oxide. The factors influencing Greenhouse gas emissions include rising of population, upward movement of per capita output and consumption, infrastructural development made about infrastructures, human character, and innovation. However, if mitigation efforts are not enough, climate change would most likely lead to a slowdown the upward movement. Thus, the study examined the relationship between economic growth and environmental degradation using the Autoregressive Distributed Lag model and examined the impact of environmental degradation on economic growth in Nigeria from 1990 to 2022 using that lens. Based on the estimated ARDL regression result, environmental degradation as determined by carbon dioxide emissions (kt) and economic growth are negatively correlated. The negative indication indicated that economic growth will decline by roughly -0.455% and -0.893% over the medium and long terms, respectively, as carbon emissions rise. The findings indicated that there is validity to Nigeria’s Environmental Kuznets Curve, which demonstrates how environmental deterioration impedes economic progress. Similarly, a positive indication indicating a one-period lag in carbon emissions showed that, in the short term, economic growth increases by around 0.948% in tandem with rising carbon emissions. Thus, the paper illustrated an inverse U-shaped interaction between environmental degradation and economic growth, with healthy economy initially related with increased emissions. However, the majority of the control variable estimates deviate from theoretical expectations. On the other hand, a positive and statistically significant one-period lagged coefficient of trade openness suggests that trade openness looks to support and encourage economic growth in the short run. Similarly, during the period under consideration in Nigeria, the short-run economic growth is positively and strongly correlated with the one-period lagged coefficient of gross fixed capital formation. The report suggested boosting energy efficiency in the world’s energy mix in order to lower greenhouse gas emissions, which are the main contributors to climate change. Therefore, in order to prevent the development of closed-form relationships that could result in a slowdown in economic growth, Nigerian government agencies that are responsible for implementing national and international environmental rules should proceed with caution.