Assessing the influence of fiscal policies on mitigating carbon emissions in Somalia

Abstract

This study investigates the impact of fiscal policies on carbon emissions in Somalia (1990–2022), using the autoregressive distributed lag (ARDL) model to analyze government expenditure, GDP, energy consumption, urbanization, FDI, and population growth. The findings reveal a long-term positive relationship between all variables and emissions, confirming that economic expansion worsens environmental degradation. In the short term, only government expenditure is positively associated with carbon emissions, while other variables show a negative correlation, likely reflecting a transient adjustment. The findings align with the environmental Kuznets curve (EKC) theory for developing economics and underscore Somalia’s urgent need for structural fiscal reforms, including carbon pricing mechanisms such as sector-specific taxes linked to expenditure and FDI, as well as renewable energy investments to mitigate emissions related to energy use and urbanization. The study also acknowledges several limitations, such as data gaps in Somalia’s informal economy, the absence of carbon emission taxes, and insufficient climate adaptation measures, highlighting the need for future research with sector disaggregation. By bridging empirical findings with policy insights, this study advocates for targeted fiscal strategies to balance Somalia’s growth with sustainability, emphasizing the importance of context-specific solutions, particularly those absent in current carbon tax debates.