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<p>Environmental sustainability has become a critical policy priority for developing economies seeking to balance economic growth with ecological preservation. However, the individual influences of financial development and renewable energy on environmental sustainability remain insufficiently explored, particularly in resource-constrained regions where institutional frameworks alter conventional relationships. This study examines the roles of financial development and renewable energy in promoting environmental sustainability within the Economic Community of West African States (ECOWAS), utilising panel data from 15 countries spanning the period from 1991 to 2021. Applying advanced econometric techniques, including Panel-Corrected Standard Errors, Feasible Generalised Least Squares, and Two-Stage Least Squares, the findings reveal that financial development is negatively associated with environmental sustainability, while renewable energy shows positive associations across all specifications. Industrial employment and urbanisation exhibit positive relationships with sustainability, whereas human development demonstrates consistently negative relationships. Robustness checks, including Granger causality analysis, confirm bidirectional relationships between financial development and environmental sustainability, validating our instrumental variable approach. These insights underscore the importance of redirecting financial sector growth toward green investments, accelerating the transition to renewable energy sources, and integrating environmental considerations into development planning and decision-making. A coordinated policy framework combining green finance mechanisms and renewable energy incentives is essential for achieving environmental sustainability in West Africa.</p>

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Towards a sustainable environment in the ECOWAS region: the potential of financial development and renewable energy

  • 期刊论文

  • 发表日期：

    2025年12月15日

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  • Kwadwo Boateng Prempeh,
  • Mohammed Musah,
  • Samuel Asuamah Yeboah,
  • Joseph Kwasi Agyemang

摘要

Environmental sustainability has become a critical policy priority for developing economies seeking to balance economic growth with ecological preservation. However, the individual influences of financial development and renewable energy on environmental sustainability remain insufficiently explored, particularly in resource-constrained regions where institutional frameworks alter conventional relationships. This study examines the roles of financial development and renewable energy in promoting environmental sustainability within the Economic Community of West African States (ECOWAS), utilising panel data from 15 countries spanning the period from 1991 to 2021. Applying advanced econometric techniques, including Panel-Corrected Standard Errors, Feasible Generalised Least Squares, and Two-Stage Least Squares, the findings reveal that financial development is negatively associated with environmental sustainability, while renewable energy shows positive associations across all specifications. Industrial employment and urbanisation exhibit positive relationships with sustainability, whereas human development demonstrates consistently negative relationships. Robustness checks, including Granger causality analysis, confirm bidirectional relationships between financial development and environmental sustainability, validating our instrumental variable approach. These insights underscore the importance of redirecting financial sector growth toward green investments, accelerating the transition to renewable energy sources, and integrating environmental considerations into development planning and decision-making. A coordinated policy framework combining green finance mechanisms and renewable energy incentives is essential for achieving environmental sustainability in West Africa.