Resource rents and environmental pollution in developing countries: Does the quality of institutions matter?

Abstract

Despite global concerted efforts to enhance environmental sustainability, environmental quality has continued degrading following upsurges in carbon dioxide (CO2) emissions. The rising pollution emissions in recent decades have largely been blamed on the growing exploitation of natural resources and institutional dynamics. Consequently, this study empirically examines the effect of resource rents on environmental pollution. The system Generalised Method of Moments approach is adopted to analyse data for a panel of 39 developing African countries over the 1996–2020 period. The key results reveal that resource rents significantly contribute to pollution emissions in the context of African economies. This positive relationship between resource rents and environmental pollution is globally validated by the various sensitivity analysis and robustness checks. However, this relationship is divergent for alternative measures of natural resources and across sub-regional economic blocs. Furthermore, the results reveal the critical role of good governance in modulating the environmental damaging role of natural resource dependence. Besides the key findings, the study equally highlights the importance of ICTs and the need to increase investments in green technologies and promote the consumption of clean energies. Indeed, the key findings suggest that for resource rents to effectively contribute to environmental sustainability by reducing CO2 emissions there is need for policymakers to reinforce the legislation through the enhancement of institutional quality. Particularly, African governments should develop and reinforce strategies aimed at curbing corruption which constitutes a major obstacle to environmental sustainability.