Table 3: Governance indicators and FDI inflow to Africa - Continued
The study established a positive causal effect of FDI on CO2 emissions loading from governance quality indicators (voice and accountability, political stability and absence of voice, governance effectiveness, the rule of law, regulatory quality, and corruption) and increase in fossil fuel energy consumption. Findings established the ‘sand the wheels’ pollution haven hypothesis as – (voice and accountability, political stability and absence of voice, governance effectiveness, the rule of law, regulatory quality) loaded positively on foreign direct investment and ‘grease the wheels’ hypothesis – (corruption) also loaded positively on foreign direct investment in Africa. However, the adverse of FDI running from weak governance on environmental degradation (CO2 emissions) are ineluctable. The complementarity effects of financial access in moderating the effect of fossil fuel consumption by income growth of the lowest 10% are also negative. Findings from the interactive regression provide useful insight for policymakers in transitioning from fossil fuel energy sources to renewable energy sources in Africa. For post-2015 –SDGs, recommendations are that the design and implementation of environmental sustainability and anti-graft policies be internationalized binding on all Multinational Corporations (MNCs) since domestic institutions in developing Africa are not weak and incapable of implementing sustainability and anti-graft policies.
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The research examines the causal link between quality governance indicators and carbon emissions through foreign direct investment (FDI) to Africa from 1996 to 2020 using the 2SLS – IV regression.