Investigation of the Relationship between Economic Growth and Carbon Dioxide (CO 2 ) Emissions as Economic Structure Changes: Evidence from Ghana

Abstract

Increase in human activities contribute to the economic growth of a country. However, these human activities also contribute to the environmental pollution (i.e. carbon dioxide emissions). The effect of carbon dioxide (CO2) emissions on the environment is becoming a pressing reality. The study explores the relationship between CO2 and economic growth in Ghana when the economic structure changes. The study also tested the existence of EKC relationship between economic growth and CO2 in Ghana. Using linear regression model to find the linear relationship between environmental pollution and economic growth in Ghana, the study employed Ordinary Least Square (OLS) in order to minimize the sum of squared residuals. The study used the data of World Development Indicators (WDI) 2017 for the period 1970-2016. The study employed CO2 (metric tonnes per capita) as proxy of environmental pollution and GDP per capita (current US $) as proxy of economic growth. Findings indicate that CO2 and GDP per capita increases at different pace and varies over time period and therefore the study could not establish existence of EKC in Ghana. However, the relationship between the variables is significant with t-value 7.784> 2 and P- value of 0.000<0.05. This means that CO2 emission level in Ghana is influence by GDP. The study findings also indicate that agriculture as the engine of Ghana’s economy growth and development is experiencing continuous decline in terms of its contribution to GDP for the past four decades. The study therefore concluded that, there is the need for establishment of regulations, proper institutional structures to set up policy framework, enforcement agencies to monitor to ensure compliance and creation of public awareness of the dangers pose by environmental degradation.