Accounting for environmental sustainability from coal-led growth in South Africa: The role of employment and FDI

Abstract

As much as energy supply remains a major challenge in most of the African countries, the compounding environmental effect of energy consumption has continued to be a serious concern to policymakers and environmental stakeholders. On this note, this study seeks to investigate the coal-led growth hypothesis for South Africa by incorporating employment as a control variable for the first time. The incorporation of the employment in investigating the coal-led growth hypothesis especially for the case of South Africa is novel given that the World Coal Association (2016) reported that the country is the sixth largest exporter and seventh largest producer of coal globally. The study implemented an Autoregressive Distributed Lag (ARDL) bound testing to cointegration for the data spanning from 1970 to 2017. As such, the empirical result revealed that coal usage is the highest emitter of carbon, suggesting that a 1% increase in coal consumption account for about 68% emission in the short run, and 56% in the long run, respectively. On the other hand, foreign direct investment (FDI) inflow discourages carbon emission in the short-run and long run so that a 1% increase in FDI inflow causes a reduction in CO2 by about 0.003% and 001%. The novelty of this study is proven in the estimation of the interaction between employment and coal consumption. However, employment induced by economic growth and coal consumption both have significant tendencies of inflicting adverse environmental impacts in the short-run and long run. Thus, this study put forward relevant policy and for onward recommendation for the government to woo new foreign investors and to switch to renewable energy as an alternative sources as a possible approach of energy efficiency and environmental sustainability with a view to achieving sustainable development goals.