Regulatory impediments to carbon emission mitigation in Sub-Saharan Africa: the impact of a hostile business environment and high tax burden

Abstract

Sub-Saharan Africa's regulatory environment ranks amongst the least business friendly in the world. The difficulty of starting and operating businesses and the high tax burden are amongst the major conditions that make the regulatory environment hostile. This study examines how these business regulatory conditions explain the growing challenges in mitigating CO₂ emissions in the sub-region. For this purpose, data from 1997 to 2018 are used to analyse an extended environmental Kuznets curve (EKC) equation for thirty (30) Sub-Saharan African countries. The results of the Method of Moments Quantile Regression analysis show that the inverted U-shaped curve of the EKC hypothesis is statistically not valid across the entire quantile distributions. The impact of increasing tax burden on CO₂ emissions is positive and increases across the entire quantile distributions. Business regulatory efficiency has a negative (i.e. decreasing) impact on CO₂ emissions across the entire quantile distributions and shows a stronger impact in countries at the upper quantiles, such as in South Africa, Botswana, Gabon, and Nigeria. Conclusively, policy choices that seek to reduce tax burden on households and firms and foster greater economic freedom for businesses are needed to break the growing trend in Sub-Saharan Africa's CO₂ emissions.

Keywords: Business regulation; Carbon emissions; Regulatory environment; Sub-Saharan Africa; Tax burden.